VAT revenue collected by HMRC has been rising year-on-year, from £70bn in 2009-10 to £115bn in 2015-16. Businesses should not underestimate the risks that this poses.
The government has extensive powers relating to VAT. Material accounting errors can create lead to penalties of between 30 and 100 per cent of tax unpaid, creating costly and time-consuming problems for management.
However, there are steps that businesses can take today to improve their accounting processes and minimise VAT issues now and in the future.
The first is to understand common problem areas that result in VAT errors:
- poor data means poor compliance;
- don’t trust your VAT return spreadsheet;
- VAT is not the sole responsibility of the individual completing the return; and
- abnormal transactions carry the greatest risk
This can then guide the introduction of simple mitigation measures, many of which can be easily adopted in resource-constrained environments.
Our series will delve further into these issues, giving you all the information you need to start assessing and controlling your VAT risk.
Download our thought leadership on managing the hidden risks of indirect tax.