HMRC owed billions in VAT: Why it’s time to be compliant

The UK government recently reassured businesses that HMRC would not take a hard line in enforcing outstanding tax debts. The messaging came as many businesses had taken advantage of deferments on paying VAT. 

To provide relief amid the COVID downturn, HMRC had allowed taxpayers to delay VAT payments. However, tax authorities were quite explicit about penalties for failing to meet the new VAT deadlines, or to arrange to make payments with HMRC.   

Now, new data reveals that one in four businesses that took advantage of the special VAT deferment have so far neglected to pay the VAT owed, or to contact HMRC to arrange payment. 

Space to manage VAT expectations…for now

How will HMRC balance its carrot and stick approach to VAT compliance?

On the one hand, authorities reaffirmed their commitment to helping distressed businesses. A spokesperson for HMRC told the press that “HMRC will support any taxpayer in financial distress as a result of Covid-19 and any business that may struggle to pay its deferred VAT should contact us.”  

At the same time, HMRC has launched more than 100 000 investigations into suspected tax evasion in the first quarter of 2021. 

In short, all appearances suggest that authorities will work with distressed businesses to help them manage their VAT repayments. At the same time, businesses that fail to contact HMRC, or attempt to evade their VAT obligations, put themselves at risk of potentially severe penalties.

How VAT compliant is your business, really?

Of course, meeting your VAT obligations on time is only one part of VAT compliance. What happens when you claim the input VAT to which your company is eligible? 

Alarmingly often, businesses file VAT incomplete or incorrect VAT claims. Based on an analysis of real world cases, VAT IT has found that 27% of VAT claimed is bases on non-compliant or missing invoices. In fact, most employees don’t even understand what constitutes a valid invoice. 

Automate your VAT reclaim to maximise opportunities 

Given HMRC’s commitment to identify and penalise VAT evasion and non-compliance, businesses can’t afford to risk non-compliant submissions. Equally, businesses should not miss out on opportunities to reclaim VAT if effective solutions are available. 

Fortunately, VAT IT’s expertise and unique VAT technology ensures you always maximise your VAT reclaim opportunities, without the risk of penalties.