Understanding VAT (Value Added Tax) is crucial for business owners in the United Kingdom. VAT returns are a regular duty for VAT-registered firms, and meeting deadlines, making precise payments, and avoiding penalties is critical to compliance with HM Revenue & Customs (HMRC).

Any firm registered with HMRC as a non-resident VAT trader must report taxable transactions regularly in the form of returns. A VAT Return specifies how much VAT a corporation must pay or be repaid by HM Revenue and Customs (HMRC). VAT is subject to various dates, thresholds, rules, and laws. Through this article, you will review all the essential components of UK VAT returns, such as due dates, payment options, and potential penalties.

VAT Returns Due Dates & Deadlines

UK VAT returns usually are filed quarterly. However, businesses can request alternate accounting periods based on their requirements. Keeping track of your VAT accounting periods and the corresponding due date for submitting your returns is crucial to ensure compliance. After completing the accounting period, VAT returns are due one calendar month and seven days later.

If your VAT accounting period ends in March, June, September, or December, the filing and payment date is the 7th of the month following. For example, if your VAT quarter finishes on March 31st, the due date is May 7th.

If your VAT accounting period finishes in a month other than January, the deadline is January 7th. For example, if your VAT quarter ends on April 30th, the due date is June 7th.

New Updates on VAT Returns & Penalty System

The new VAT penalties rules came into effect on January 1, 2023These new rules are designed to be more proportionate and encourage businesses to submit their VAT returns and payments on time.

New penalty point system for late VAT returns: Businesses will now get penalty points for late VAT returns instead of the old surcharge system. Businesses will earn one penalty point for each late return. If a company accumulates 12 penalty points in 12 months, it will be liable to a 5% surcharge on the VAT due.

New penalties for late VAT payments: The penalties for late VAT payments have also been changed. For prices between 16 and 30 days late, businesses will now receive a penalty of 2% of the VAT due. For payments over 30 days late, companies will accept a liability of 2% of the VAT due on day 15, plus an additional 2% penalty based on the amount outstanding on day 30.

Changes to interest on late VAT payments: The interest rate on late VAT payments has also been increased. The new rate of interest is 4% per annum, calculated daily.

How to Avoid Penalties?

How to Avoid Penalties

There are a few options for avoiding fines for late VAT returns and payments. These include timely submission of your VAT return.

  • On-time payment of VAT.
  • If you cannot pay the VAT owed on time, you can devise a payment plan with HMRC.
  • Being late for a good reason, such as a natural calamity or a computer system malfunction.

Tips & Tricks for Avoiding Penalties:

  • Set a calendar reminder to submit your VAT return on time.
  • Check that you have enough money to cover the VAT.
  • If you anticipate being late, please get in touch with HMRC as soon as possible to discuss your alternatives.
  • Maintain accurate records of your VAT transactions. This will assist you in calculating the VAT payable and avoiding errors.

Payments Gateways for VAT

To avoid potential fines, making precise and timely VAT payments is critical. HMRC provides many payment options to help businesses satisfy their VAT obligations:

Direct Debit: Establishing a Direct Debit with HMRC enables automatic VAT payments on the due date. It’s a simple and quick way to ensure on-time payments.

Bank Transfer: Businesses can pay VAT via bank transfer using the HMRC-provided bank information. When completing the payment, provide your VAT registration number and the correct accounting period reference.

Web Payment: HMRC’s web gateway provides a safe platform for electronic VAT payments. You can pay with a debit or credit card using this method.

To Sum Up

Keeping track of your VAT duties is crucial for every VAT-registered firm in the United Kingdom. Understanding the due dates, utilising the proper payment methods, and avoiding late submissions and payments can help you stay in compliance with HMRC and avoid fines. Check HMRC’s website regularly for updates or changes to VAT legislation and consult a tax professional to guarantee correct and up-to-date compliance with your VAT returns.