
1. Review VAT return processes to avoid late filing and payment surcharges
Companies regularly incur penalties for failing to pay their VAT. They typically say that there is no cash available, did not realise the importance of paying on time, or they simply forgot. HMRC is unlikely to accept any of these excuses, imposing a surcharge as a percentage of unpaid VAT as a result. Dedicating any available cash to paying outstanding VAT on time and agreeing time-to-pay arrangements for the balance with HMRC before the due date can help to avoid late payment surcharges. If you make an error and receive a penalty, it is often worthwhile appealing. As your business expands, your accounts staff will have to process higher transaction volumes and values. A simple review of VAT return processes and safeguards can highlight weaknesses before issues arise. Setting up reminders, documenting processes and having a plan for staff absences all help avoid problems.2. Be aware of common errors when expanding into new markets
3. Manage your cash flow efficiently, don’t waste bad debt relief
As an expanding business, you have to closely manage your cash flow, and you may have customers in the same situation, stretching payment terms. You should have a system to automatically identify debts more than six months overdue in order to be able to claim back the VAT element of the unpaid amount and only pay HMRC when the debt is actually paid. Too often this is left as an annual exercise, wasting earlier relief.4. Simplify reporting by forming VAT groups
Growing businesses often set up new activities in separate companies to ring fence risk that could lead to multiple VAT registrations. A holding company that has no taxable business activity of its own is not entitled to be registered or recover VAT on its compliance costs. By forming a VAT group, you can simplify VAT reporting and enable the parent company costs to be recovered, subject to recovery rules.5. Know when you reach the VAT threshold
High growth start-ups can reach the £81,000 VAT-registration threshold very quickly. Unfortunately, this is often missed as owners, busy managing a growing company, seldom think about it until their year-end. They can then be subject to late-registration penalties and undeclared VAT from the date they should have registered. Keeping a rolling monthly check on turnover will help avoid the cost and worry. Sarah Barron is indirect tax manager at Menzies LLP. Image sourceShare this story