Contractor accountants may want to encourage their clients to register for VAT if they are eligible to pay it and have not already done so.

HMRC recently launched a new campaign to persuade firms that trade above the £73,000 turnover threshold to get their house in order. Businesses that take up the offer will receive softer late payment penalties, whilst those that do not will face substantial penalties and possible criminal prosecution.

The Revenue is to send out at least 40,000 letters to companies telling them how they can register and settle up outstanding liabilities. Firms have until the end of September to make a full disclosure and the majority of them will receive the low penalty rate of 10% on their overdue VAT payment. Furthermore, they will be given the opportunity to disclose other tax arrears in return for a lower than normal penalty.

Once this amnesty had ended, HMRC will begin investigating any firms that have not made a voluntary disclosure. The Revenue has received £500 million already from voluntary disclosures made during three similar campaigns.

HMRC’s Mike Wells, has urged people to come forward and take advantage of the best possible terms. The outstanding VAT, plus any penalties, needs to be paid no later than December 31st.

HMRC has also warned taxpayers that they will not get away with defrauding the tax system. The department’s assistant director of criminal investigation, Martin Brown, said HMRC is cracking down on fraud and has received additional money from the government to help fight tax avoidance and tax evasion.

He made his comments after a “self-styled Lord”, Gregory Roberts, admitted attempting to defraud the Revenue of £3.5 million from falsified documents.

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A recent survey by Inuit shows that 69% of small businesses are put off recruiting new staff because of the burden of PAYE.

The software provider discovered that nearly 50% of employers did not realise that their end of year returns had to be filed by the 19th of May and 28% said they did not expect to meet the deadline.

Mark Linton, the founder of The Business Growth Show, said one of the major challenges facing small business owners is not the actual process of recruiting new staff, but what to do once they’re onboard.

PAYE for small businesses is a nightmare. “How do I pay staff?”, “Is government legislation getting in the way?” And “am I doing it right?” are all questions that worry small business owners, he explained.

In previous years, there was a seven-day grace period for people who missed the deadline but now that year-end returns have to be filed online, this has been removed. Employers who did not submit on time face a penalty charge of £100 per 50 employees for every month, or part month, that the return is overdue.

SMEs are also worried about the compliance checks HMRC is about to implement. Penalties of up to £3,000 could be imposed on businesses that have not kept accurate employee records.

Meanwhile, another survey, this time from the Clydesdale and Yorkshire banking group, has found that 10% of small business owners have been late making VAT payments and 19% have missed out on grants or tax breaks.

Whilst 15% of small business owners are bamboozled by new regulations, 16% said they did not know who to turn to for advice on business legislation. Gary Lumby from the banks said it was a matter of concern that SMEs did not know how to get help and the banks hope to remedy that situation for their clients.

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The deadline for online VAT returns is drawing close. As from April 1st this year, it becomes mandatory to file online.

Businesses that do not comply with the new online regulations will face a fine from HMRC.

The Federation of Private Businesses believes there are many benefits to using the online service. These include 24/7 access and an instant acknowledgement of receipt. An initial online error check is performed; businesses can obtain a seven-day return and extension and use the system to nominate an agent or online accountant.

The only disadvantage, according to many contractor accountants, is that direct payment must be made electronically through the BACS system, CHAPS, Bank Giro and internet or telephone banking.

Another change that comes into effect on April 1st this year concerns the receipt of cheques. If paying VAT by cheque, the payment is classed as made when the cheque clears as opposed to when it was received.

Businesses are strongly advised to urgently review their VAT procedures, including contractors using the Flat Rate VAT Scheme, to ensure they comply with the new regulations.

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