VAT Returns

Harrison Hinchliffe Accountants manage VAT Returns for many companies throughout Manchester and Glossop.  There are many schemes available for businesses which effect the way in which we calculate your VAT. We assess each companies records and structure to ensure the correct scheme is applied.

We can take care of the burden of filing your VAT returns for you so that you do not overlook anything. Each period we file VAT returns and this comes output VAT and input VAT. Output VAT means all the tax you have charged to your customers on your invoices and input tax being the VAT you have paid from invoices elsewhere.

We can collate this information on your behalf and file your VAT returns for you, normally saving you money in the process as having a professional accountancy service dedicated to the cause will enable your business to claim back more VAT than what you maybe thought you could.

Making Tax Digital Introduction

If you run a VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you are required to keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software. The vast majority of businesses need to do this for VAT periods that started on or after 1 April 2019. Businesses with a taxable turnover below the VAT threshold can also sign up for MTD for VAT voluntarily.

When MTD for VAT will be mandatory for your business

If you are registered for VAT and your taxable turnover is above the VAT registration threshold (currently £85,000), you must keep digital business records and send your VAT returns to HMRC using MTD-compatible software. For the vast majority of businesses this applies to accounting periods that started on or after 1 April 2019.

If your taxable turnover has dropped below the VAT registration threshold at any point after 1 April 2019 you are still required to continue to keep digital records and send HMRC your VAT returns using MTD-compatible software. This obligation doesn’t apply if you de-register from VAT or if you are exempt from MTD for VAT.

More About VAT

• You do not have to register for VAT until your business hits the £85,000 (2020 tax year) threshold within a 12 month period. Once you reach this number, then mandatory VAT must be registered.
• If your company deals with many other customers that are VAT registered, it may be in your interest to go VAT registered even if you are not hitting the £85,000 threshold (Contact us for more details as to why)
• At the moment standard VAT is 20%, however there are other VAT levels that we can explain that may be beneficial to your business.

VAT accounting scheme thresholds

VAT accounting scheme	Threshold to join scheme	Threshold to leave scheme
Flat Rate Scheme	£150,000 or less	More than £230,000
Cash Accounting Scheme	£1.35 million or less	More than £1.6 million
Annual Accounting Scheme	£1.35 million or less	More than £1.6 million

Deadlines

Check your VAT Return and payment deadlines in your VAT online account.

Your VAT online account tells you:

• when your VAT Returns are due
• when the payment must clear HM Revenue and Customs’ (HMRC) account

The deadline for submitting the return online and paying HMRC are usually the same – 1 calendar month and 7 days after the end of an accounting period. You need to allow time for the payment to reach HMRC’s account.

Pay your VAT bill

You must pay VAT to HMRC electronically, eg through direct debit or internet banking. Most businesses aren’t allowed to pay by cheque.

Surcharges and penalties

HM Revenue and Customs (HMRC) record a ‘default’ if:

• they don’t receive your VAT return by the deadline
• full payment for the VAT due on your return hasn’t reached their account by the deadline

Surcharges

You may enter a 12-month ‘surcharge period’ if you default. If you default again during this time:

• the surcharge period is extended for a further 12 months
• you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you owe

HM Revenue and Customs (HMRC) will write to you explaining any surcharges you owe and what happens if you default again.

How much you pay

Your surcharge is a percentage of the VAT outstanding on the due date for the accounting period that is in default. The surcharge rate increases every time you default again in a surcharge period.

This table shows how much you’ll be charged if you default within a surcharge period.

You don’t pay a surcharge for your first default.

Defaults within 12 months	Surcharge if annual turnover is less than £150,000	Surcharge if annual turnover is £150,000 or more
2nd	No surcharge	2% (no surcharge if this is less than £400)
3rd	2% (no surcharge if this is less than £400)	5% (no surcharge if this is less than £400)
4th	5% (no surcharge if this is less than £400)	10% or £30 (whichever is more)
5th	10% or £30 (whichever is more)	15% or £30 (whichever is more)
6 or more	15% or £30 (whichever is more)	15% or £30 (whichever is more)

Exceptions

There’s no surcharge if you submit a late VAT Return and:

• pay your VAT in full by the due date
• have no tax to pay
• are due a VAT repayment

Penalties

HMRC can charge you a penalty of up to:

• 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy
• 30% of an assessment if HMRC sends you one that’s too low and you don’t tell them it’s wrong within 30 days
• £400 if you submit a paper VAT Return, unless HMRC has told you you’re exempt from submitting your return online

Contact a member of our team to see how we can assist you further.