Thousands of businesses are in the dark about VAT and potentially failing to meet payment obligations to HM Revenue & Customs (HMRC), a new survey suggests.
Small business insurer Direct Line for Business questioned 498 business owners and found that 36 per cent of micro businesses – those employing up to ten people – were unaware of the registration threshold, which is £82,000 for the 2015-16 tax year. The figure equates to 780,000 micro businesses across the UK.
The insurer warned that many small firms could be unintentionally not paying money due to HMRC, putting them at risk of penalties and surcharges.
Of the businesses that are aware of the threshold, nine per cent – equivalent to around 122,000 UK businesses – had deliberately limited sales to remain under the VAT limit. Of micro enterprises that have limited sales, 27 per cent had even temporarily ceased trading to remain under the VAT registration threshold.
Jasvinder Gakhal, director of Direct Line for Business, said: “We’re a fantastically entrepreneurial nation with increasing numbers of businesses being started all the time, but these companies still have tax obligations even if they are run out of a bedroom or a garage.”
The insurer also reminded small and micro enterprises t explore opportunities to reclaim VAT on purchases made by for their company, which could help them to significantly reduce their business expenses.
VAT is a notoriously complex tax and trying to get to grips with the VAT regime can be particularly challenging for micro and smaller businesses with limited in-house resources.
Moore Thompson can provide comprehensive advice on all aspects of VAT, including registration, deregistration, ongoing VAT administration, use of the most appropriate scheme and VAT planning for specific transactions or projects. For more information, please contact us.