Three things to watch out for in your VAT return

The risks of incomplete VAT filings have been highlighted by a recent victory for HMRC over an appeal.

The appeal – made by Sacutia Healthcare Ltd (TC06844) – concerned the father of the company director, who claimed a defence based on carelessness. Unsurprisingly, HMRC took the view that this amounted to ‘deliberate but unconcealed’ behaviour, which is why it applied substantial penalties of £24,072 on a total assessment of £57,839.

The nature of the filing errors should provide warning for those with responsibility for their company’s VAT filing.

Export evidence

HMRC found that the VAT return was missing paperwork to support declared exports of goods and documents made to a company that the father was involved with. HMRC also found no record of Sacutia as an exporter. It is essential that you keep complete and accurate records of exports for VAT.

Deposits on customer payments

The output tax was not correctly reported on customer deposits. A tax point is created whenever a company receives a deposit, as well as the balancing payment, so you must ensure your VAT records reflect every stage of a customer transaction.

Input tax evidence

As well as the issues with export invoices, HMRC found that Sacutia had claimed input tax on supplies of goods using invalid invoices. They also found uncertainty around pro-forma and VAT invoices, and mistakes in the accounting records. As with export records, you must keep your accounting records complete and accurate.

The case demonstrates the high penalties HMRC will issue where mistakes are made with VAT filing. With Making Tax Digital for VAT just around the corner, we can help you ensure your company filings are error-free.

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