Last week we shared an idea on how to defer and reduce CGT payable on the sale of residential property. We also had a warning about the VAT annual accounting scheme, and have news of how HMRC are nudging taxpayers into using their personal tax accounts.
This is an
extract from our topical tax tips newsletter dated 11 August 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
VAT annual scheme
Taxpayers opt to use the VAT annual accounting scheme because they want to complete only one VAT return once a year, instead of four. You may have arranged to process that one VAT return for your client, which will work well if the client pays all the VAT instalments as agreed and on time.
If the taxpayer doesn't pay the VAT as due, HMRC will unilaterally take the business out of the annual accounting scheme, and will write to inform them that quarterly VAT returns and payments are due. You may not get a copy of that letter.
This is what happened to Angela Spence, a solicitor on the VAT annual accounting scheme. She failed to pay the full amount as agreed for her VAT instalments on four occasions, so HMRC sent her two warning letters. She didn't read those letters properly and claimed she didn't receive the final letter which removed her from the annual accounting scheme.
As Miss Spence didn't appreciate she was no longer in the annual accounting scheme, she carried on paying VAT by instalments and didn't complete quarterly VAT returns. This lead to HMRC issuing estimated VAT assessments and three default surcharges. It took a year of such correspondence before she rang HMRC to find out what had gone wrong.
If you let your clients deal with their own VAT affairs, impress upon them that they must read carefully and respond to any letters they receive from HMRC.
This is an
extract from our topical tax tips newsletter dated 11 August 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We've been
publishing this newsletter weekly since 2007; it's clearly written
and focused on precisely what accountants in general practice need to
know about each week. You can obtain future issues by registering here>>>
Tuesday 16 August 2016
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