VAT and Making Tax Digital

Avoiding Errors In VAT Returns

The discovery by H M Revenue & Customs of errors in the preparation of the Return can often lead to the imposition of interest and penalties. Listed below is a checklist to help improve the accuracy of your Return.

  • Check the liability to VAT on all the income you receive
  • Compare the VAT Return with the previous period and because of seasonal variations the corresponding period of the previous year. Look for and explain any significant variances
  • Check you are declaring output VAT and recovering input VAT in the right period. Errors are commonly made with cash in hand
  • Check the arithmetic in the Return
  • Use the correct boxes, 2, 8 and 9 are European transactions only
  • Make sure you correct errors from earlier Returns
  • Check that the outputs shown on your Return agree with the bar takings and other taxable income shown in the Accounts and Balance Sheet if they do not find out why

Output Tax Errors:

  • Failure to keep up to date with changing legislation, e.g., gaming machines, land and property transactions
  • Failure to account for output VAT on sale of capital asset, e.g., furniture, organ
  • Not accounting for tax on drinks to committee members, ‘duty drinks’
  • Stock deficits – cash deficiencies are taxable; deficits of goods are not taxable
  • Income of subsidiary funds are taxable if part of the club, non-taxable if they are a separate legal entity below VAT registration limits

Input Tax Errors:

  • Reclaiming tax without holding a proper tax invoice
  • Not reclaiming all input tax.
  • Free refreshments – input tax on purchases of drinks and refreshments provided free to visitors is considered business entertainment and not reclaimable, i.e., visiting rugby teams
  • Reclaiming tax which should be disallowed because it relates to exempt supplies (subject to de minimis limits) or is specifically prohibited
  • Reclaiming input VAT invoiced to subsidiary funds which are separate legal entities