In terms of tax developments January can traditionally be a quiet time coming as it does in the gap period between the December Budget and the early February release of the Finance Bill.  This year however there have been a few developments which will be of interest to readers and of course it is also the time when employers and traders must finalise their annual VAT and payroll taxes Returns for 2011.

Tax & VAT Filing Deadlines

Many traders remit VAT and Payroll taxes by means of direct debit during the course of a calendar year with the annual VAT Return for 2011 due for submission on 23 January when filing via ROS and the P35 declaration a month later. When a business keeps proper track of its liabilities as they build up during the year and varies their direct debit payments accordingly no issue arises when declaring the actual liability arising on the annual year end declaration.

However in recent years as the recession has grown ever more acute the temptation has arisen for businesses to “get by” during the course of the year by under paying their VAT and/or payroll taxes and then trying to overcome a sometimes significant shortfall in payments made as the annual filing deadline approaches.

While the Revenue will argue his should not happen the fact is that it does and businesses need to be assisted in a professional manner in addressing the issues arising in a calm pragmatic and business-like manner.  A few recommendations as to how to deal with a shortfall of this nature:

(i)    Always file the annual VAT Return and P35 on time.

(ii)    If an under payment arises engage with the Collector Generals office on a constructive basis and try and come to an acceptable instalment arrangement.

(iii)    Note that Revenue are increasingly looking for additional information such as a copy of last Accounts and information as to the bank overdraft/ borrowing position of the business and cooperation is recommended.

It should be noted that it is a condition of all instalment arrangements that CURRENT taxes are also kept up to date and with this in mind it should be borne in mind that a reversion to filing of Returns on an actual basis throughout the following year by reference to actual VAT/payroll tax liabilities arising is usually required by Revenue when signing off on an instalment arrangement.

From April 2012, HMRC will be charging penalties and interest for lat payment of PAYE to add to the growing suite of penalties, fines and interest the poor tax payer is subjected to. This syndrome of lower MRC resources and growing agression on the part of HMRC makes the climate for businesses ever more dangerous.

As multi award winning Business minded Tax Experts & Accountants in Wimbledon, London and Croydon, we look after our clients in more ways than just their financials. Talk to us today.