Everyone has a fear of an unexpected letter dropping through their door from HMRC, and there is nothing worse than opening a brown envelope to discover a demand for under or unpaid tax. Most people spend a significant amount of time ensuring that they are up to date with their filing and payments, but of course, mistakes can be made, so it’s always nerve-wracking to learn that something has been overlooked along the way.
However, small businesses which have received an assessment for underpaid VAT may not need to worry as concerns have been raised about the validity of some of the demands that are being sent out. Tax experts CCH have expressed their concern that tax officers may be exceeding the four years ‘look back’ limit when sending out these penalties. The group have identified recent occasions on which underpaid VAT assessments have been issued for expired accounting periods.
Under the current rules included in the VAT Act, HM Revenue and Customs can only look at the records for the four years prior to the end of the accounting period to determine whether VAT has been underpaid. Even if there is cause to investigate, this must take place within one year of the department obtaining evidence which suggests that an assessment needs to be made.
Failure to assess a case within one year means that a tax officer is only allowed to look at the previous two years, and any request to look at records from before four years has to be accompanied by proof that proof of ‘dishonest declarations’.
This means that firms who receive an assessment for unpaid VAT should ensure that they check that the given reason for assessment is valid and also that the period covered is actually correct. Although many people’s first response is to panic about the potential for fines increasing if they are unpaid, it is always worth ascertaining whether the fine has been issued correctly.
It is worth noting that anyone who has been penalised for late VAT registration will not be subject to the same ‘look back’ limit as in cases where this is the reason for the investigation and could be pursued for unpaid VAT from the previous twenty years.
If you are working for yourself and want to be sure that you don’t receive any unexpected bills from HMRC, then using a specialist freelancer accountant will help you to keep on top of your deadlines and ensure that you never get any unexpected surprises. Our specially designed packages allow you to relax when it comes to your finances and out friendly accountants will help you to save money and time and allow you to focus on your business. For details of how we can help you, call us today on 01253 362062 or email us at firstname.lastname@example.org.