VAT Return Red Flags To Be Wary Of - a Quick Recap

People generally submit their VAT Return to the HMRC of Her Majesties Revenues and Customs in every three months. So the accounting period is ideally of 3 months, while they are to get things right.

Now, when it comes to getting ‘things' right, being cautious about the common mistakes in regards to VAT Return is utterly essential.

Here are the most common mistakes that taxpayers need to be cautious about when it comes to filing flawless VAT return.

The Dilemma of Box 6

While one will find eight boxes for completing a VAT Return, the 6th one from the top is the source of a number of confusions, more often than not. It is THIS box, where the HRMC usually finds mistakes committed by the VAT returners. 

For people who are using the Flat Rate version of the VAT scheme, then this box is meant for the Gross Income, on which the percentage of the flat rate is calculated.

Then again, for those who are using the Cash Accounting scheme, this notorious ‘Box 6” should feature the net income or the net of the VAT.

However, those who are using the Standard or Cash VAT accounting scheme, the box should have the income net of the VAT payable.

However, there can very well be other relevant figures and items from box number 8 that are to be fed into box 6. Hence, there are quite a few plausible reasons, for which figures need to be repeatedly checked to make sure there is no area of discrepancy left during VAT return in London. In fact, the bookkeeping companies put particular emphasis on this issue so that their clients do not find themselves in any tight spot on the charge of ‘falsification of facts'. 

Using The Wrong Percentage of Flat Rate

This is another area where HMRC put more importance. This is also an area, wherein many small businesses are found to suffer. This is because the latest VAT rule that has been introduced is mainly meant for the limited cost businessmen and traders.

The latest rule is believed to substantially raise the Flat Rate Percentage for most of the service-based businesses. Hence, it is essential to take some added care. Flat Rate Percentage needs to be repeatedly revised and reviewed to avoid any VAT inquiry by the authorities, which may lead to payment of back-dated VAT.

Not comparing the different VAT schemes

Yes!! This is another major mistake that people generally commit. However, it is the responsibility of the providers of bookkeeping services in London to guide their clients.

One needs to take into account, that the FRS leads to significant savings of cash flow for the smaller businesses. Besides, it is meant to make the account system trifle simpler. However, not comparing the Flat Rate Scheme with the Cash Accounting Scheme is a mistake of Himalayan proportion that may nullify this advantage.

The other major mistakes include understating the flat rate turnover, using the one percent reduction rate well after the expiry date, lacking enough evidence to support VAT reclaims, claiming back the VAT that are imposed upon expenses not related to business, inappropriate claim for VAT on entertainment, cars, other vehicles and fuel, not claiming VAT on entertainment of the staffs connected to business, and the likes.