Chapter 7

Question 1

Annette VAT error is calculated as

Answer 1

The difference between the additional VAT due to HMRC less any VAT claim bought by the trader

Question 2

How is an error corrected in the underlying records?

Answer 2

Via adjourn entry to the appropriate nominal ledger accounts which will include the VAT control account

Question 3

How will an error in the draft VAT return be corrected by?

Answer 3

By adjusting the relevant box on the draft return

Question 4

How is a single error affecting output tax adjusted for?

Answer 4

By adding or subtracting it to box one

Question 5

How is the single error affecting input tax adjusted for?

Answer 5

Adjusted for in box box 4

Question 6

What happens if there is several errors?

Answer 6

They are knitted off and the single figure for the arrows will be entered into the draft return

Question 7

When the several errors have been knitted off, will they be entered?

Answer 7

As additional input tax inbox for if there have been an earlier under claim of VAT or is an additional output tax inbox one if the net error was a net overclaim in a previous return

Question 8

What goes in box one?

Answer 8

Single error affecting output tax and errors resulting in VAT overclaim in past

Question 9

What goes in Box 4?

Answer 9

Single area affecting input tax and error is Resulting  in VAT unclaimed in past

Question 10

When should the HMRCVAT error correction team be informed?

Answer 10

Immediately either by letter or form for deliberate errors or errors above the error correction threshold

Question 11

What are the two methods of correction?

Answer 11

Incision of next VAT return or incision on form VAT652 all by letter

Question 12

How does the method of correction depend on?

Answer 12

The size of error

Question 13

What information should be provided HMRC regarding an error?

Answer 13

How do you ever happened? The amount of error the VAT period incurred and whether the error involved input output tax how the error has been calculated?

Question 14

What must the taxpayer use for larger errors and deliberate errors?

Answer 14

Form VAT652

Question 15

How is the distinction between a small or large error determined?

Answer 15

By the error correction reporting threshold

Question 16

Whatever errors can be included on the next VAT return

Answer 16

Non-deliberate errors, no more than £10,000, between 10 and 50,000 but no more than one percent I’ve turned over for the current return period

Question 17

When was errors be separately disclosed?

Answer 17

If they exceed 50,000 or exceed 10,000 and are more than one percent of the turnover for the current return period, our deliberate error, relating to accounting period that ended four years ago

Question 18

What is the demand?

Answer 18

A discovery assessment to collect any VAT due

Question 19

When can HMRC issue a demand?

Answer 19

Normally HMRC have upped four years after the end of the return period in which the error occurred

Question 20

When is a demand extended 20 years?

Answer 20

For errors arising from deliberate behaviour such as fraud

Question 21

What is the penalty point threshold?

Answer 21

Annually 2 and quarterly4

Question 22

What happens when a threshold is met regarding penalty points?

Answer 22

A £200 penalty is charged this will apply for all late submissions

Question 23

Will a taxpayer always get penalty points if late?

Answer 23

Not if they can demonstrate reasonable excuse for the late submission

Question 24

What excuse can you not give relating to a late submission?

Answer 24

Lack of funds or relying on third-party to submit the return

Question 25

What is the penalty of 15 days of late payment?

Answer 25

None

Question 26

What is the penalty of like payment for up to 16 to 30 days?

Answer 26

2% of VAT outstanding at day 15

Question 27

What is the late payment penalty for 31 days of more?

Answer 27

2% of VAT outstanding at a 15+2% of vat outstanding at day 30 A daily rate based on 4% per annum charged every day from day 31 until paid for 

Question 28

When does the late payment penalty not apply?

Answer 28

To taxpayers paying instalments on the annual accounting scheme, the penalties will still apply to the balancing payment due under the scheme

Question 29

What happens if a taxpayer is difficulty paying the VAT to HMRC?

Answer 29

They can arrange for a time to pay arrangement

Question 30

What is a time to pay arrangement?

Answer 30

This is a personalised payment plan agreed by HMRC preventing subsequent penalties arising

Question 31

What happens if a taxpayer does not keep to the time to pay arrangement?

Answer 31

The penalties will be applied as if the time to pay arrangement never exist

Question 32

What will HMRC charge in relation to late payment?

Answer 32

Interest from the first day the payment is due until it is paid in full

Question 33

What is the interest that The HMRC charge?

Answer 33

2.5% above the Bank of England base rate for example if the base rate is 5% interest would be 7.5%

Question 34

Will late payment interest be included on time to pay arrangements?

Answer 34

It will continue to accrue

Question 35

What happened when taxes overpaid?

Answer 35

HMRC will pay repayment interest on any tax due to be repaid. This will be paid from either the last day of the payment was due to be received for the date it was received until the date of repayment the rate will be paid less than one percent of the base rate.

Question 36

When does interest for late payment not apply?

Answer 36

To the taxpayers paying in stall months on the annual accounting scheme, the interest will however still apply to the balancing payment due under the scheme

Question 37

What happens if a trader discovers a non-careless accidental error such as a simple mistake?

Answer 37

Then they must take steps to correct it if they don’t then HMRC will treat it as a careless error and a penalty charge

Question 38

What is the penalty charge for a careless error?

Answer 38

Lower than the maximum possible unless there has been a sequence of careless errors

Question 39

What are the two consequences when a trader does not register for VAT when the businesses turnover goes over threshold?

Answer 39

All the VAT that the trader should’ve been charged from the date they should’ve been registered is payable. Your penalty can be charged, which is a percent of the VAT due known as potential lost revenue

Question 40

What does the penalty for late registration depend on?

Answer 40

Whether the trader deliberately failed to register when the children informed HMRC and whether the disclosure was prompted or unprompted

Question 41

What is a penalty if the non-registration of VAT was non-deliberate?

Answer 41

Within 12 months tax being due they pay interest unprompted 30%, prompted 10 to 30% 12 months or more after unprompted 10 to 30%, prompted 20 to 30%

Question 42

What is the tax charged on the late registration of VAT if deliberate?

Answer 42

Unprompted 20 to 70%, prompted 35 to 70% Deliberate and concealed and unprompted 30 to 100%, prompted 50-100%

Question 43

What happens if a trader does not submit any VAT return at all?

Answer 43

Then HMRC can issue an assessment that estimates the amount of VAT due

Question 44

What happens if the estimate estimate after an assessment is too low and the trader does not tell HMRC within 30 days

Answer 44

The penalty can be charged for the emission too, a penalty can recharge at 30% of the potential loss revenue, a maximum penalty of up to 500 maybe charged for each failure to retain adequate records

Question 45

What happens when they return has been completed?

Answer 45

It must be submitted HMRC and any VAT owing paid to HMRC