Communication within VAT and Payroll

• once a vat return is completed it should be reviewed and signed off by the authorised person or agent
• the vat return is then submitted electronically to HMRC
• the latest that a vat return can be submitted to HMRC is one month and 7 days after the end of the vat quarter
• the payment sent to HMRC is usually to the same timescale as the submission
• if a direct debit has been set up then HMRC will take the money 3 working days after the last submission date
• most businesses are now using software programs to perform the accounting function
• if the return needs no adjustments then you may be authorised to submit this return yourself
• any current errors discovered can be corrected before the vat return is submitted
• previous period errors and omissions are also corrected in the current vat return subject to certain conditions
• any errors should be investigated and no corrections made without written consent from your manager
• the errors can be corrected in the current vat return and not disclosed to HMRC if they are:

  below the reporting threshold

  not deliberate
• for an accounting period that ended less than 4 years ago and where the net value of the errors is

  less than 10,000

  between 10,000 and 50,000 (and less than 1% of box 6) then these may only need signing off by your manager
• you must disclose the following types of errors:

  between 10,000 and 50,000 (and greater than 1% of box 6)

  greater than 50,000

  an error you made on purpose
• Each instance of late submission results in one penalty point for the business. These penalty points add up, and once a specific penalty point threshold is crossed, an initial penalty of £200 is imposed. Subsequent late submissions while at this penalty point threshold will result in an additional £200 penalty
• The conditions for the removal of penalty points depend on whether the business has reached the penalty threshold or not. If the business has not reached this threshold, each point automatically expires two years from the first day of the month after the month when the late submission occurred.
• A late payment penalty will be imposed if a VAT payment is 16 or more days overdue. The sooner the payment is made, the lower the penalty will be.
• Payments that are between 16 and 30 days late result in a “first late payment penalty” only. This is a fixed penalty based on a percentage of the VAT outstanding at day 15.
• When the payment is 31 or more days overdue, the “first late payment penalty increases” and a “second late payment penalty” is imposed.
• Finally, if a VAT Return isn't submitted on time, HMRC will issue a ‘VAT notice of assessment of tax’ which will state how much HMRC think is owed. 
• ANNUAL ACCOUNTING SCHEME

  annual vat returns

  monthly amounts paid to hmrc which helps with cashflow

  any rebate due is sent at the end of the year
• CASH ACCOUNTING SCHEME

  allows business to account for the vat on transactions when they are received or paid rather than using tax point dates

  vat returns are submitted quarterly
• FLAT RATE SCHEME

  calculate vat liability by apply a flat rate percentage to its vat inclusive turnover

  less certainty about the amount of vat liability due

  simplifies record keeping
• FULL PAYMENT SUBMISSION (FPS)

  provides hmrc with all employee data relating to their pay

  must be submitted before or on employees pay day

  includes payments to and deductions for all employees
• EMPLOYER PAYMENT SUMMARY (EPS)

  used to inform hmrc that no employees were paid in the month and that non-regular claims and adjustments are being made

  must be submitted by the 19th of the following tax month
• Penalties may apply if:

  • •the FPS was late
  • •the expected amount of FPS’s was not filed
  • •an Employer Payment Summary was not filed.
• However, penalties may not apply if:

  • •the FPS is late but all reported payments on the FPS are within three days of the employees’ payday (unless there is regular lateness)
  • •a new employer is late but sends the first FPS within 30 days of paying an employee
  • •it's a business’s first failure in the tax year to send a report on time.
• Further penalties are due if the payment due to HMRC is late. 
• The first failure to pay in a tax year doesn't count as a default. Late payment penalties apply to late payments and payments of less than is due.