HMRC is to write to accountants and non-represented individuals advising them that HMRC records show that they have not paid VAT or submitted returns. Any unpaid tax should be disclosed, dating back up to six years.
If businesses do not send overdue returns and pay any VAT due, HMRC said it will “make an assessment for the VAT we estimate is due and ask you to pay that amount.” This could be more than what you owe.
“If you send us a return late, we can also charge you a surcharge or penalties, as well as interest. We can charge different penalties, depending on whether the accounting period starts before or after 1 January 2023.”
Your VAT return and payment are usually due one calendar month and seven days after your quarterly accounting period ends. Penalties will not be charged if businesses have a reasonable excuse for not sending a return on time. The return must be sent as soon as the reasonable excuse ends.
Late submission is now subject to a new HMRC process. This involves automatic estimation of the VAT due, causing two potential problems. Firstly, a higher assessment involves potential cash flow problems. However, a lower estimate can tempt some people to pay the smaller amount rather than submit their return. A penalty is charged if the low estimate is not reported to HMRC within 30 days. The fine involved can be up to 30% of the difference between the assessment value and the actual VAT liability.
The automatic assessment value is cancelled when your actual VAT return is submitted.
As well as receiving as automatic assessment, each late or absent VAT submission receives a penalty point. A financial penalty of £200 is charged when the points threshold is reached:
- Annual submission – 2 points
- Quarterly submission – 4 points
- Monthly submission – 5 points
This penalty process applies to all returns, including nil and repayment returns.
“The best way to avoid the stress and potential fine involved with late VAT returns is to ensure your return is submitted accurately and on time,” says Emily Bridges of re:accounts Chartered Accountants in Stevenage. “Automatic assessment may incur cashflow problems if the assessment is higher than the amount due, however by not paying the estimated amount, further financial penalties may apply. In these circumstances, HMRC refunds the difference between the payment and actual amount.”
Ensure your VAT returns are completed and submitted on time, every time. Talk to the tax experts at re:accounts. We’ll keep your tax affairs in order and minimise the payments due.
