{"id":25217,"date":"2023-09-12T09:50:07","date_gmt":"2023-09-12T08:50:07","guid":{"rendered":"https:\/\/smh.group\/?p=25217"},"modified":"2023-09-12T09:50:07","modified_gmt":"2023-09-12T08:50:07","slug":"dont-get-caught-in-the-vat-penalties-net","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/dont-get-caught-in-the-vat-penalties-net\/","title":{"rendered":"Don\u2019t get caught in the VAT penalties net"},"content":{"rendered":"<p class=\"western\"><span lang=\"en-GB\"><b>The 50<\/b><\/span><sup><span lang=\"en-GB\"><b>th<\/b><\/span><\/sup><span lang=\"en-GB\"><b> anniversary of the UK\u2019s introduction of VAT was earlier this year, but despite being around for a while, many VAT-registered businesses still find VAT too complex and confusing. No surprise then that more businesses than ever are getting hit with penalties for inaccuracies.<\/b><\/span><\/p>\n<h2 class=\"western\"><span style=\"color: #000000;\"><span lang=\"en-GB\"><b>Inflation and frozen thresholds<\/b><\/span><\/span><\/h2>\n<p class=\"western\"><span lang=\"en-GB\">Two things that are not helping are the high rate of inflation combined with a freeze on various VAT thresholds.<\/span><\/p>\n<p class=\"western\"><span lang=\"en-GB\">Since 2017, the registration threshold has been \u00a385,000, so with increased prices it is easy for a business to become liable for VAT despite staying the same size.<\/span><\/p>\n<p class=\"western\"><span lang=\"en-GB\">Meanwhile the thresholds for remaining within the flat rate, cash accounting and annual accounting schemes, have remained virtually unchanged for around 15 years, so, again, it is easy to mistakenly continue with a scheme when no longer eligible to do so.<\/span><\/p>\n<h2 class=\"western\"><span style=\"color: #000000;\"><span lang=\"en-GB\"><b>Beware penalties<\/b><\/span><\/span><\/h2>\n<p class=\"western\"><span lang=\"en-GB\">With HMRC aiming to close the tax gap for VAT, the risk of penalties for inaccuracies will only increase; for 2021\/22, the number of penalties issued was already substantially higher than for the previous year, a trend which is sure to continue.<\/span><\/p>\n<p class=\"western\"><span lang=\"en-GB\">HMRC is able to charge a penalty of up to 30% of the extra VAT due if an error arises due to lack of reasonable care.<\/span><\/p>\n<p class=\"western\"><span style=\"color: #000000;\"><span lang=\"en-GB\">In HMRC\u2019s view, it is reasonable to expect a business to find out about the correct VAT treatment or to seek appropriate advice<\/span><\/span><i><b> <\/b><\/i><span style=\"color: #000000;\"><span lang=\"en-GB\">when encountering a transaction with which they are not familiar. <\/span><\/span><\/p>\n<h2 class=\"western\"><span lang=\"en-GB\"><b>A get out of jail card?<\/b><\/span><\/h2>\n<p class=\"western\"><span lang=\"en-GB\">Incurring such a penalty is somewhat careless. However, there may be a get out of jail option if this arises.<\/span><\/p>\n<p class=\"western\"><span lang=\"en-GB\">HMRC have the discretion to suspend a penalty, for period of up to two years, during which time a business must comply with certain conditions. The aim is to prevent further penalties in the future, so a business could, for example, be asked to improve its record keeping. <\/span><\/p>\n<p class=\"western\"><span lang=\"en-GB\">If this is done, the penalty will be cancelled at the end of the suspension period, but best to avoid such a scenario in the first place.<\/span><\/p>\n<p class=\"western\"><span lang=\"en-GB\">HMRC\u2019s guidance on VAT errors can be found <\/span><strong><span style=\"color: #4d8fe8;\"><u><a href=\"https:\/\/www.gov.uk\/guidance\/how-to-correct-vat-errors-and-make-adjustments-or-claims-vat-notice-70045#VAT-errors-submitted\" target=\"_blank\" rel=\"noopener\"><span lang=\"en-GB\">here<\/span><\/a><\/u><\/span><\/strong><span lang=\"en-GB\">.<\/span><\/p>\n<p>Our <a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/chartered-accountants\/\"><span style=\"text-decoration: underline;\"><strong>Yorkshire and Derbyshire based Accounting &#038; Business Advisory<\/strong><\/span><\/a> can assist on <strong>0114 266 4432<\/strong> or <a href=\"mailto:info@smh.group\"><span style=\"text-decoration: underline;\"><strong>info@smh.group<\/strong><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The 50th anniversary of the UK\u2019s introduction of VAT was earlier this year, but despite being around for a while, many VAT-registered businesses still find VAT too complex and confusing. No surprise then that more businesses than ever are getting hit with penalties for inaccuracies.<\/p>\n","protected":false},"author":4,"featured_media":25218,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[3],"tags":[199,35,69,83,77,76,654],"class_list":["post-25217","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smh-accounting-business-advisory","tag-accountancy","tag-business","tag-capital-gains-tax","tag-chartered-accountants","tag-financial-planning","tag-vat","tag-vat-deferral"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Don\u2019t get caught in the VAT penalties net - SMH Group<\/title>\n<meta name=\"description\" content=\"The 50th anniversary of the UK\u2019s introduction of VAT was earlier this year, but despite being around for a while, many VAT-registered businesses still find VAT too complex and confusing. 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