18 Sep 3 common VAT misconceptions explained
VAT, the dreaded Value Added Tax, is something which can often befuddle and mystify business owners, to the point where it’s worth outsourcing to a professional VAT specialist just to avoid the headaches. While VAT can be a complex beast, there are several long-standing misconceptions which make the waters even murkier.
Here are 3 of the most common.
VAT registration is mandatory
False. This only becomes true when your business reaches the point of turning over £85,000 or a year. Up to that point, you’re under no obligation whatsoever to be VAT registered, but you must remember that if you’re not VAT registered then you must under no circumstance charge your customers VAT.
While it’s not mandatory to register for VAT, there are many businesses who choose to register for VAT before they reach the threshold of it becoming legally obligatory. Get in contact with a specialist for specific VAT advice and if early VAT registration would be right for you.
Mistakes mean heavy fines
While mistakes on your VAT return are far from ideal, it’s a misconception that HRMC will immediately come down on you like a tonne of bricks for an error. The circumstances of the error as well as the simple calculation of how much, if anything, it has cost HRMC will determine how the mistake is handled.
For example, there are certain errors of £10,000 that can be accounted for on your next return. It’s important not to get complacent, however, and judge yourself whether the mistake is worth reporting. If you know there is an error, let HMRC know as soon as possible. When it comes to any tax, honesty always pays.
At the time of writing, VAT is currently calculated at 20%. Sounds simple then? Wrong. VAT is a highly complex process subject to a variety of legal requirements and legislation which is constantly shifting, and being redeveloped and re-examined.
Navigating it yourself can be hard, especially if you don’t know what you’re doing, which is why so many businesses consider outsourcing to a VAT specialist to be a very worthwhile investment indeed.