Should you be paying VAT to HMRC when your customers have not paid you?

There are provisions which allow you to reclaim the VAT you have paid to HMRC if your customer has not paid you within six months of the due date of the invoice. It is always sensible to keep your list of debtors under review to identify these items and reduce the amount you pay to HMRC in a later VAT period accordingly. Of course you have to pay over the VAT again later on when the customer pays you

There are a couple of warnings to be aware of as : you must document the write off for VAT purposes and must not have factored the debt.

The other side of these rules are that you need to remember that if you have not paid a supplier six months after the due date of an invoice, you must adjust your next VAT Return for the VAT you have not paid to the supplier. Again you reclaim when you actually pay. It is easy to overlook this and very easy for a VAT Officer to find this type of error on an inspection

If you are a small business (with a turnover of less than £1,350,000) you can join the cash accounting scheme where you deal your VAT according to when your customers pay you or when you pay your suppliers. If you invoice your customers and have to wait for them to pay you, this can be much better for your business cashflow. You do need to be careful that you deal with any changes in the VAT rate (as in January) properly, but otherwise the scheme is easy to operate.

Did you receive your tax return last month and whats changed?

The basics are the same as last year :

- if you fill in the paper form you must return the complete return by 31 October 2011

- if you complete and submit an ‘on-line’ form you must submit this by 31 January 2012

Again as usual, if you are completing a paper form check early on that you have the right pages for your employments, self-employments, capital gains etc. It will take a few days to get these through if you have to telephone HM Revenue & Customs for them (the number is on page two of the Return).

If you are completing on-line and using the HMRC service for the first time, make sure you request and activate your access codes well in advance of the deadline. Again it take a week or more to get these through if you do not have them.

If you are using an accountant it is likely that they will use commercial software to prepare and submit your Tax Return avoiding some of these problems.

The big change this year is that if you are due to submit a Tax Return and this is submitted late you will be charged a penalty of £100 even if you have paid all your tax or are due a refund. If you are more than three months late a further penalty of £10 per day will be charged for the next 90 days. If you are struggling to obtain part of the information you should consider submitting the Return with an estimate – just make sure you tick box 20 and provide the accurate information as soon as you can.

If you are unable to meet the filing deadline and think you may have a ‘reasonable excuse’ you may be able to get the penalty cancelled. Relying on this should always be a last resort and if you think you need help with your Tax Return, it is vital to arrange this early and not leave it until just before the filing deadline.