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Business Services  •  Business Tax  •  VAT

What happens when your VAT return is late?

By RJP LLP on 18 June, 2019

The start date for the first VAT returns to be submitted through Making Tax Digital was on 1 April 2019. Now, many business owners are in the midst of their preparations for filing their first full quarter returns digitally. It’s important to be on time with VAT returns and any associated payments. Delays will be liable to a surcharge and here are some recent cases where although the owners thought they had good reason for being late, HMRC thought otherwise.

Secco Muro Ltd

Secco was a plastering contractor and has operated as a business since September 2014. It was VAT registered and in the default regime since 10/15. The business was late to file its returns for 04/16 and 07/16 because payment of the VAT return liability was late.

Secco claimed it had cashflow problems due to issues with its largest customer, Seren Contractors Ltd. The owner said he believed that when funds were tight, it was more important to pay his workers than be on time with his VAT payment to HMRC. “VAT can wait a week or two, but men have to be paid as they have families to feed…”, he said. Secco’s bank statements showed that a large amount was paid by Seren into its bank account on 7 September 2016, the due date for payment of the 07/16 VAT return.

HMRC issued surcharge liability notices and Secco appealed the penalties at a tribunal. The appeal was made on grounds that their largest customer had gone into administration, other customers were late paying their bills and the company was normally always on time with PAYE and corporation tax.

Records showed that Seren did enter administration and HMRC was aware this created a legitimate cashflow problem for Secco because of the timing around the company’s VAT return payment dates. However, Secco had neglected to notify HMRC of these financial problems in advance and did not try to negotiate a time to pay arrangement. If they had done this, they would most likely not have received a penalty.


PVC Trade Supplies Limited

PVC is a double-glazing business and they also claimed cashflow difficulties as the reason their VAT payments were late. The business was VAT registered from 2014, persistently late making VAT payments and was in the default regime from period 01/15.

PVC’s director Jonathan Thomas contacted HMRC just before the VAT was due to make a payment, but due to an issue with HMRC’s computer, was unable to make the payment straight away. The HMRC officer involved informed Mr Thomas that he had a couple more days before he needed to pay anyway.

Eventually, payment was made 1 day late by Visa card and HMRC then issued a surcharge liability notice to PVC, which the company appealed.

PVC’s grounds of appeal were that they didn’t realise VAT had to be paid on the specific date or the owner would have done a bank transfer instead of paying with VISA. He also argued that it was only a matter of a day being late and hardly worth worrying about.

The tribunal did not overturn the penalty issued to PVC, because they argued the company had been in the default surcharge regime for a number of years and should have been well aware of its VAT obligations.

What does it mean for me?

The message in both of these stories is the same. If you think you may not be able to pay your VAT bill by the deadline date, it is essential to contact HMRC’s Business Payment Support Service and notify them of your difficulties. Even if you cannot pay the full amount but agree to pay a portion, you may avoid a penalty

Now, with MTD also adding to the complexity of VAT returns for some business owners, it is even more important to be on top of your bookkeeping. All returns and payments must be made in good time to ensure that no default surcharges are triggered.

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