Every three months you’re required to submit a VAT Return to HM Revenue and Customs, even if you do not have any VAT to pay or reclaim.
The chances are you have received a VAT return due soon reminder, however if you haven’t do not take this as a ‘Get out of jail free’ card and ask yourself, are you aware of the massive implications of a late VAT return?
If you’re a small business without an accountant to file it for you, it can be easy to miss the VAT deadline. With all the other things going on when running your business, your VAT return is likely to be one of the last things you think about.
However, if you miss the VAT deadline, it will now have implications.
How do I know if I charge VAT?
If your business’ VAT taxable turnover is more than £82,000 you must register for VAT, you can also register voluntarily if it is below this.
From the date of registration you must:
- Charge your customers the right amount of VAT
- Pay any VAT due to HMRC
- Submit VAT Returns
- Keep VAT record and a VAT account
You may be able to reclaim the VAT on purchase that relate to these sales. Click here to find out more about this.
How much VAT will I have to pay?
You will have to pay the difference between your output VAT and your input VAT.
Output VAT- is the VAT you calculate and charge on your OWN sales of goods and services.
Input VAT- is the VAT you are charged when you buy goods or services from a supplier.
If you use an accounting system, such as Clarity365, this will normally be calculated for you.
What happens if I miss the VAT Return deadline?
If you miss the VAT Return deadline or fail to pay the full amount due on your return, a default is recorded. If you default you will enter a 12-month ‘surcharge period’. HMRC will write to you explaining any surcharges you owe, and what happens if you default again. It makes no difference as to the reason for the delay, the length of delay or size of business.
How are VAT surcharges calculated?
So here comes the important bit. Your surcharge is a percentage of the VAT you owe and this can be up to a massive 15%. The minimum surcharge you will pay at the 10% or 15% rates is £30.
Below is a table showing you the different charges for each time you default.
|Defaults within 12 months||Surcharge if annual turnover is less than £150,000||Surcharge if annual turnover is £150,000 or more|
|1st||No Surcharge||No Surcharge|
|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)|
|6th||15% or £30 (Whichever is more)||15% or £30 (Whichever is more)|
There are some exceptions to these surcharges. For example, there’s no surcharge if you:
- Pay your VAT in full by the date due
- Have no tax to pay
- Are due a VAT repayment
However, I think you’ll agree the cost could be massive if you don’t manage to get your VAT Return filed on time. In addition to these charges you could also get a penalty of up to £400 if you submit a paper VAT Return, unless HMRC has told you you’re exempt from submitting your return online.
VAT surcharge notice
The first time you fail to submit or pay your return on time and default, you will be sent a Surcharge Liability Notice. This notice lasts for twelve months. If you default again within this period, you’ll be issued a Surcharge Liability Notice Extension which will extend the period for another 12 months and so on.
VAT surcharge appeal
If you disagree with the decision that you are liable to pay a surcharge, or the amount that you have been calculated you can ask HRMC to review your case.
If you want to appeal the surcharge you’ll need to write to HRMC within 30 days of the date the notice was sent to you, giving reasons why you don’t agree with the decision. An accountant or advisor can also do this on your behalf.
Some reasons you might appeal the surcharge include:
- You think you have a reasonable excuse for the default
- You think HRMC have applied the wrong rate of surcharge
- You think HMRC have used the wrong amount of VAT when calculating the surcharge
- You think there are exceptional circumstances which mean the default should be removed.
Find out more about VAT Surcharges and Appeals here.
How do I find out when my VAT Return is due?
To find your deadline, you simply need to check your VAT online account. This will tell you when your returns are due, and the date the payment much clear HMRC’s account. Remember, you need to allow time for the payment to reach HMRC, so always try and get your VAT Return in as early as possible.
Useful VAT information
Below are some links you may find useful when filing you VAT return, or checking if you are legible to pay VAT. Keep your eye out on our blog for more useful tricks and tips for filing your VAT return.