Tag Archive | "vat return"

SMEs may be forced to file their VAT returns online


Accountants for contractors may be interested to learn that HMRC has launched a consultation on the proposal to make online filing of VAT returns compulsory for firms with a turnover of under £100,000.

The Revenue wants more businesses, and individuals, to go digital and conduct their transactions online.

If approved, the VAT filing requirement will come into force next April. HMRC would also like to see all businesses use online systems for registering and deregistering for VAT and amending their company details. There are no plans to make the registration requirements mandatory yet.

The Revenue has been moving business taxation online since 2006 and online is fast becoming the default channel for business taxation. Lord Carter said in his original review of online services that legislation was necessary to combat general business inertia and that this should take place in stages.

HMRC says that processing will be both quicker and more accurate once filing is conducted online and that should appeal to companies.

However, the FPB says small businesses are paying the price of inadequate online tax systems and red tape continues to hold back SMEs ability to comply with tax regulations.

Andrew Needham, the tax advisor to the FPB, said the tax system includes complex and cumbersome online procedures. Furthermore, he said that HMRC employees received no training on dealing with VAT returns submitted electronically; a situation he found mystifying.

It now takes up to 50 days to complete VAT registration due to extended verification procedures and small businesses are suffering. Late payment of PAYE attracts penalties but small businesses are battling with the worst cash flow problems in 20 years.

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Contractor accountants should prepare for corporation tax changes


Accountants should be aware that the end of the present tax year is fast approaching and HMRC has reminded the UK small business community that changes to corporation tax are imminent.

As from the start of the new tax year, corporation tax filing and payments will need to be made electronically. Furthermore, all company tax returns for accounting periods that ended after March 2010 will also have to be filed in XBRL or iXBRL format.

Payment of corporation tax will have to be made by Direct Debit, credit or debit card, using either bank transfer or the BillPay service.

An HMRC spokesperson explained that these changes will affect associations, charities, clubs, co-operatives and societies as well as any limited company. Firms will be able to use commercially available software to file or the department’s own CT software aimed at firms with less complex taxation affairs, the Revenue added.

As from April next year, firms will also have to submit their VAT returns online.

Meanwhile, the Institute of Directors is calling on the government to reduce corporation tax until it reaches 15% in 2020. People are starting to think of the UK as a high-tax economy and that will not encourage foreign companies to invest here.

The IoD wants the UK to have the lowest rate of corporation tax throughout the world. It has estimated that this could be achieved at a cost of £9 billion a year, a figure which could be achieved by continuing restraint on public sector growth.

By reducing corporation tax to just 15%, the UK would be sending out the strong message that it is open for business.

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HMRC back down over penalties


HMRC has been issuing a large number of incorrect VAT penalties over the last year and a half, according to UHY Hacker Young. In fact over 50% of the penalties that were issued to taxpayers were later overturned on appeal

Official data shows that of the 28,812 late or inaccurate VAT return cases the Revenue has reviewed, 16,270 were imposed incorrectly. A similar pattern emerges when you take into consideration the penalties issued for technical reasons across all taxes. 48% were subsequently found to have been issued wrongly.

Worryingly, many people do not query the penalty, said Simon Newark, a VAT partner at UHY Hacker Young. He also pointed out that whilst businesses try their best to understand complex taxes, if HMRC’s own employees also struggle, it seems highly unjust to make businesses suffer.

In related news, thousands of firms that should have filed their accounts with Companies House by the 31st December are now studying the appeals process.

In the first two weeks of the new year, almost 1,700 appeals were lodged against late filing penalties, including one business owner who says he sent his accounts by first class mail on December 16th. This should normally be more than enough time for mail to reach its destination but the icy weather conditions in December knocked the postal system for six.

Companies House has said the adverse weather was not spread across the entire country and is therefore an exceptional circumstance for a small number of companies.

Late filing fees, starting at £150, are automatically issued once accounts become overdue. Guidance on the Companies House website states that you can appeal the penalty but to be successful you need to prove exceptional circumstances and delays in the post do not normally qualify.

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Are you ready for the VAT increase?


11% of businesses have still not prepared for the VAT increase which comes into force on January 4th next year, according to the results of research conducted by Sage.

In November, the software provider conducted a survey of 1,500 of its customers about the impending change. Over two thirds (68%) of the respondents said they were prepared, but 11% had not yet considered the implications of the increase.

Adapting systems to cope with a different VAT rate should not be so daunting this time around. A couple of years ago, the rate was temporarily reduced to 15% before returning to 17.5% at the beginning of this year.

The main problem, at least as far as SMEs are concerned, is whether to pass the increase on to customers. Dr Philpott from the CIPD says that smaller-sized retailers will be most affected by the change and yet the government is banking on such businesses to create employment and help drive economic growth.

However, a spokesman for the British Retail Consortium has said that online retailers are in a better position to absorb the increase than their high street counterparts, due to lower business overheads. eBay’s Online Business Index seems to confirm that view showing that 63% of online retailers are not expecting to pass the full increase onto their customers.

Contractor accountants may also find more people contacting them for help completing quarterly VAT returns. As the rate rises on the 4th of January rather than the first, some companies will need to file a return which incorporates both the 17.5% and 20% standard VAT rates.

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Time to think seriously about the VAT deadline


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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