Settle VAT now to avoid a closer look into your tax affairs
The taxman will soon warn tens of thousands of companies that their failure to pay Value Added Tax on time will mean that their entire tax affairs – not just the owed VAT - will come under his spotlight, says Martin McKechnie, a director at the Low Tax Group.
At present, more than 600,000 businesses currently file their VAT returns on a monthly basis but approximately 50,000 will be told that their tax affairs face greater scrutiny if these traders have still not settled up with the VAT-man by late February.
Some of the businesses to be targeted will have already received an assessment of VAT for the periods in question. They will likely be directed by HMRC to its VAT Outstanding Returns Campaign, which if the businesses come clean and settle up may offer them better terms, such as lower penalties, than if the Revenues catches them first. But the new sting in the tail of this supposed amnesty is that if the VAT is still unpaid by a trader after February 28th, the trader’s tax affairs will be subject to “closer attention”, HMRC has threatened.
As a result, we are advising any VAT-registered freelancer or business owner with outstanding VAT returns to submit and bring their VAT affairs up-to-date before February 28th. If they fail to do so, they can expect HMRC to use its full legal powers to pursue such non-compliant businesses with the stated objective of a more thorough look into their tax arrangements.
As ever, failure to submit VAT returns is an offence which can result in default surcharges and penalties of up to 100% of the tax due. It can even lead to a prison sentence.
If VAT-registered sole traders/freelancers, or even their clients and agencies, have outstanding VAT returns to submit or VAT to pay, taking advantage of HMRC's VAT Outstanding Returns campaign before it's too late certainly appears to be the lesser evil.
30th January 2013