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Sadly Steve Allen died in July 2011. His wife Leah would like to thank all those who know Steve and helped contribute to his success. She has recommends Steve's clients and anyone who is interested in this article topic to contact Rob McCann from “The Vat people” on (tel) 0161 477 6600 . Please make reference to Steve Allen.

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Lord Carter has undertaken a review of the Governments online services – so what you may well ask! Well, he has recommended that all filing should be done online, including VAT returns. The mandatory filing and paying of VAT returns will be phased in from 2008. The schedule for introduction will be:

• Businesses with a turnover greater than £5.6 million and newly registered businesses will have to file electronically for VAT periods starting after 31 March 2008.

• Businesses with a turnover greater that £100,000 with VAT periods starting after 31 March 2010.

• The Government will review the position of businesses with a turnover less than £100,000 in the run up to 2012.

This will obviously impact small businesses that do not use computers or individuals that are not happy using new technology.

More interesting is the fact that the VATman will allow late returns without imposing a penalty (Default Surcharge) if his software breaks down and you cannot submit your return on time. However, if you have a problem with your software or your service provider breaks down you could still be liable to a penalty for late submission of your return. We have asked the VATman if businesses could submit a paper return if his computer systems have broken down to ensure that the returns arrive on time and, therefore, avoiding a penalty for late returns. Helpfully, we have been told that electronic filing will be mandatory, so they will not accept paper or faxed returns and any that are submitted that way will be ignored and a default Surcharge will arise - nice!

The Default Surcharge works like this, a first late return and you get a warning letter, another late return within 12 months and a penalty of 2% of the tax due is imposed. This grows to 5%, 10% and finally 15%. If you get 12 months of returns in on time you go back to zero.

In the event of a default surcharge arising, a business has the right to have it removed if he can show that he has a ‘reasonable excuse’. It seems likely that there will be a lot of reasonable excuse cases before the VAT Tribunals following these changes as businesses try and show that late returns were as a result of unforeseen computer breakdowns and outside their control. We would expect the Tribunals to take a reasonable view in these cases, particularly if a business has tried to submit a paper return and the VATman has refused it!

About the Author

Steve Allen is the Director of VAT Solutions (UK) Ltd, an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. Both not only are respected tax advisers, but have worked for both Customs & Excise and one of the top four accountancy firms for many years. This mean that their team know both sides of the equation and are truly experts in this field.

The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from their website

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Article Published/Sorted/Amended on Scopulus 2006-11-14 21:07:00 in Tax Articles

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