VAT Online: The final countdown
17 February 2010
- Businesses with a turnover of £100,000 or more will be required to file online from April 2010
- The same applies to businesses of any size that register for VAT from April
- Letters are currently being issued explaining how the online system works
- Failure to meet requirements can result in a penalty - read on for details
Nigel Harris outlines the requirements for businesses filing VAT returns online and summarises the penalties.
Most advisers and businesses know that online filing of VAT will be mandatory from April 2010. All businesses with turnover of £100,000 or more will be required to file and pay VAT by electronic methods from April, as will businesses that register for VAT from 1 April 2010, irrespective of size. This applies to VAT returns that cover accounting periods starting on or after 1 April 2010.
The measurement of turnover for the purpose of deciding if you are over the £100,000 limit was made on 31 December 2009, so all businesses with annual turnover of £100,000 as of that date will be included in the requirement to file online, whether or not their turnover subsequently falls below that amount. Letters are being sent this month to registered traders who meet this criteria explaining how the online system works.
Those with a lower turnover have a brief respite, but HMRC has stated that it hopes to have all VAT returns filed online by 2012, so it's only a matter of time before we say goodbye to all paper VAT returns.
Penalties
Failure to meet the new filing requirements can result in a penalty. The
penalties for failure to comply with these requirements will apply to returns
made for periods ending on or after 31 March 2011, thus allowing businesses a
period of a year to adjust before the penalties for failing to file online are
imposed. Of course default surcharge may also be due if a return is filed late,
but the new penalties in Regulation 25A(17) apply only to a failure to make a
return by the specified method. The penalties increase according to the VAT
exclusive turnover of the person failing to make the return by the required
method. The penalties are as follows:
- Turnover £100,000 and under - £100
- Turnover £100,001 to £5,600,000 - £200
- Turnover £5,600,001 to £22,800,000 - £300
- Turnover £22,800,001 and above - £400
VAT regulations specify that the due date for the return may be varied if the return is required to be submitted electronically, including a right to vary the due date if no payment is due. However, a payment return must also be paid electronically for the extended due date to apply – businesses which are normally repayment traders which very occasionally submit a return for payment should therefore ensure that they have set up a direct debit authority or other automated payment facility to avoid being caught out.
To get started you need to register with HMRC for online filing – a handy beginners guide is available online here.
Completing a return online is very straightforward if you know how to fill in the paper version, and the process has been streamlined in the latest update so fewer mouse clicks are needed to navigate through the online system. A how-to guide with screen shots is available here.
Being online there may be a temptation to cut down on paper records, which could cause problems when accounts are being prepared later, so make sure you keep a full paper (or digital) trail. The completed online return can be saved to disk, printed on paper, or printed to a PDF file if you have the appropriate software. If you use a manual accounting system, prepare the VAT return workings as you have always done, with a complete summary which records the figures you are going to enter on the return and where they came from.
Once you have submitted your return to HMRC you will get an on-screen unique submission receipt reference number. It's a good idea to save or print a copy of this on-screen confirmation in case of any subsequent queries. Alternatively you can register your email address to receive an email confirmation of receipt of returns.
Online VAT filing may encourage more businesses to use accounting software rather than manual or spreadsheet records. All the leading desktop and online accounts software providers include online filing of VAT returns from within their applications, making the whole process simplicity itself.
Posted by nigel harris in Tax, In business on Wed, 17/02/2010