Avoiding VAT mistakes is crucial for businesses to stay compliant and prevent potential fines. Being VAT-registered is suitable for small businesses. It helps with things like returning VAT on purchases and making your business look more professional. But it would help if you did accurate VAT returns to enjoy these benefits and follow the VAT rules. This task can be tricky.
Even when the numbers seem right and the VAT codes look good, VAT is complicated, and you can’t be sure. Knowing where VAT mistakes often happen can help you avoid them, making your work much more manageable. In this post, we’ll discuss the common VAT mistakes returns that will help you to rectify your mistakes.
Common VAT Mistakes and How to Avoid Them
Let’s read some of the common VAT mistakes and how to avoid those mistakes;
Claiming Back VAT without a Valid Invoice
To recover or claim back VAT, businesses must adhere to HMRC guidelines. A purchase invoice from a supplier is essential for reclaiming the input tax charged.
Forgetting to Register a New Business for VAT within 30 Days
Neglecting to take prompt action to register a new business with HMRC for VAT can lead to penalties. The owed VAT and the length of the registration delay determine the penalty amount.
Submitting Incorrect Figures on your VAT Return
According to HMRC, if you’ve made a mistake on your VAT return before submitting it, you can correct it by amending your records. Ensure you provide an apparent reason for the change and indicate the accurate VAT figure. If the return has already been submitted, refer to section 4 on the HMRC website for the correction process.
Late Payment of your VAT Return
Being tardy in paying your VAT return incurs late payment interest from the day your payment becomes overdue until it is fully settled. Also, starting 1 January 2023, HMRC has implemented new late payment penalties.
Delayed Issuance of VAT Invoices
Issuing VAT invoices within a specified timeframe is crucial. According to HMRC, issuing a VAT invoice within 30 days of supplying goods or services is generally required. If payment has been received in advance, the 30-day period begins from receipt.
Common VAT Definitions
Navigating through various business tax definitions can be complex. We have compiled a list of common VAT-related keywords and their definitions to assist.
VAT Thresholds
VAT thresholds refer to the predetermined revenue levels businesses must register for Value Added Tax (VAT). These thresholds vary among countries, serving as a critical determinant for firms to assess their tax liabilities. Crossing the designated threshold necessitates compliance with VAT regulations, ensuring proper collection and remittance of taxes to the respective tax authorities.
VAT Taxable Turnover
VAT taxable turnover encompasses the total sales subject to tax, excluding any VAT-exempt amounts.
VAT Certificate
A VAT certificate is a document issued by HMRC confirming your business’s official registration for VAT. The certificate includes:
- Your business’s distinctive VAT number
- The effective date of registration
Fines and Penalties for VAT
From 1 January 2023, HMRC has updated its penalties and interest charges for VAT submissions and payments made after the due date, aiming to ensure fairness in the process.
Understanding the Distinction between Zero-Rated and VAT-Exempt
The terms “zero-rated” and “VAT-exempt” may seem similar but have subtle differences. Goods and services classified as 0% or zero-rated VAT are still considered taxable, with the VAT rate set at 0%. Examples include:
- Advertising services for charities
- Charity shops selling donated goods
- Building services for disabled people
In contrast, VAT-exempt goods and services are not taxable, and no VAT can be charged. Examples of these include:
- Lottery ticket sales
- Betting and gambling
- Antiques
A UAE VAT course can make a big difference in your job prospects in the GCC countries. Gaining VAT certification benefits individuals by enhancing their understanding of VAT processes, boosting career prospects, and providing valuable skills for roles like VAT Consultant or Finance Manager. It helps you understand how VAT works in practical terms for businesses. Finprov offers courses for both the recent graduate or an experienced professional. Our job-oriented courses give you the skills you need to find a good job quickly, and we also help our students with job placement.
In our UAE VAT course, you’ll learn essential things like the basics of VAT, how VAT registration works, the impact of VAT on import and export businesses, details about invoicing and documentation, understanding VAT compliance and filing duties, mastering accounting entries, good recordkeeping practices, and knowledge about potential penalties. Being skilled in these areas can open doors to different careers, including roles like VAT Executive, VAT Consultant, Finance Manager, Senior Accountant, Tax Executive, VAT Expert, Billing Clerk, Sales Accounting Manager, or other administrative positions.
