DSH Chartered Accountants & Business Advisors has set out a handy guide to help cash-strapped companies steer clear of VAT trouble.
DSH’s simple set of Dos and Don’ts provides businesses with a simple guide that aims to minimise the impact of being unable to make VAT payments to Her Majesty’s Revenue & Customs (HMRC).
Martin Dane, Head of VAT and Indirect Taxes at DSH, said:
“We have found that businesses hit by even a relatively small, temporary cash-flow hiccup can find themselves in a situation where they cannot pay their VAT on time. This can lead to a spiral of debt, interest and incur a number of penalties and surcharges, which all too often result in insolvency.
“Our simple Dos and Don’ts list can help these businesses stay on the right side of the taxman during this difficult time and give them the opportunity to get their finances back in order.”
- DON’T hold back from submitting VAT returns if you do not have the money to settle them. This will only result in racking up default surcharges and HMRC’s guesswork assessments, both of which are legally enforceable.
- DO submit your returns when they become due and immediately negotiate with HMRC’s debt management unit for time to pay.
- DON’T rob Peter to pay Paul. Paying the VAT but not paying Employers’ NI or Corporation Tax is not an option.
- DO get in touch with HMRC’s debt management unit, explain the problem and negotiate payment terms for all current and upcoming tax liabilities.
- DON’T issue spurious credit notes or cross-charges to reduce VAT liabilities. HMRC takes a very dim view of this.
- DO continue to account for VAT in the proper manner, even if you can’t pay it. That will ensure that your negotiations with HMRC are based on an accurate liability and there is nothing hidden which will cause damage when it comes to light.
- DON’T over-stretch your budget in negotiating a time-to-pay arrangement with HMRC. The worst possible outcome is agreeing time-to-pay with HMRC but failing to stick to it.
- DO take time to prepare a detailed and realistic forecast, suitable for presentation to HMRC, on which to base your payment proposal.
- DON’T assume that you can let things slide because it will take HMRC ages to catch up with you.
- DO contact HMRC as soon as there’s a hint of a problem. HMRC acts quickly to pursue and enforce VAT and tax debts.
Martin added: “VAT is a simple tax. It is its application that is so complicated and creates the pitfalls and problems for the unwary business owner and manager. Professional expert advice is essential to avoid these problems.”
For a free no obligation meeting to see if DSH can identify potential problems and savings with your VAT situation please talk to Martin Dane, Head of VAT & Indirect Taxes at DSH on 01622 690666.