Return confusion
Most traders make VAT returns every 3 months. Anyone with turnover up to £1.35m can apply for annual accounting – one return a year, like income tax or corporation tax. It’s not all good news, though – you only have two months at the end of the year to get the figures together, and you have to make payments on account of the expected liability throughout the year.
A recent case showed that it can be even worse than that. A trader applied to go onto annual accounting, but was confused about what returns he had to submit while he was changing from quarterly periods. As a result, he was late submitting a return, and as a result of that, HMRC told him he had to go back to quarterly periods. He explained that he’d misunderstood, and they agreed that he could rejoin the annual scheme – but by then he’d missed the deadline for a quarterly return, and they charged him a penalty.
The Tribunal was more sympathetic than HMRC. The trader had reasonably expected that the misunderstanding would be sorted out and the period would be covered by the annual return. He had a reasonable excuse that cancelled the penalty. He probably wished he hadn’t bothered with annual accounting, though.
If the idea of making a single VAT return interests you, we can help you avoid this trader’s problems.