Basic errors in VAT

Many registered businesses assume that they have a clean bill of health when it comes to VAT compliance. However, when the control officer comes calling, it is the same basic errors that lead to the recovery of most of the underpaid tax. It is worthwhile knowing what the most common mistakes are:

• if you buy fuel for a motor car which is put to private use, do not forget to add a fuel scale charge for each car to your output tax
• you may not claim the input tax on the purchase of a motor car except where there is 100% business use or, in the case of a taxi or driving school car, predominantly business use
• do not reclaim input tax on any form of entertaining
• if you take goods from your business you must account for output tax on their full sales value
• if you sell an asset used in your business you must account for output tax on this sale (there are special rules for cars)
• do not reclaim VAT on purchases of goods or services unless you have a valid VAT invoice
• do not reclaim VAT on purchases of goods or services for personal use, such as home telephone
• if you sell goods to private individuals or unregistered businesses in other EU countries you must charge VAT as normal
• if you have reason to use a rate of VAT on a sale of anything other than 17.5% make certain that this rate is correct.

Simple errors over long periods can lead to a substantial bill for undeclared VAT. Please contact us if you would be interested in a VAT health check for your business.