I owe the VAT man, what should I do?
It just came to my attention that I owe VAT which I have never had to pay before. This is confusing because I don’t have a very large business and our profits are not very high. Suddenly I get a notice that I owe money and I don’t understand why. Can you explain why I only made about £8,000 more than I did last year and this year they say I need to pay?
My company is a small print shop that serves a fairly localised clientele in Brighton. We print menus, adverts, business cards, brochures and other products of this kind. There are only myself, as the director/owner, my wife and two clerks working at the shop. This year I brought in £84,732 and last year it was just under £76,000. This isn’t a great deal of money but the amount I will need to pay in VAT seems huge. Please tell me, since I owe the VAT man, what should I do?
Answer
One of the aspects of paying Value Added Tax (VAT) which is always rather confusing to small business owners and directors is that there is a threshold which must be met before they need to register for VAT. If you keep in mind the ‘magic number’ £77,000 pounds you should not have any problems. It is when you have sold taxable goods and services that total more than that amount within a twelve month timeframe that you will be responsible for registering.
There are several reasons why you may have been notified that you owe VAT. Some business owners don’t expect (or know about!) that threshold so they don’t register. Then when filming in their annual accounts, HMRC sees that sales went beyond that mark. This will immediately be flagged for investigation. Other times, a company has registered but didn’t make the money they expected and didn’t deregister if their taxable sales fell below £75,000.
The bottom line is that if you have received notice from HMRC that you are delinquent in VAT or that you have failed to register, it is imperative that you act immediately. Indeed there are times when the VAT man makes a mistake and you really do not owe the amount requested, if anything at all! We can help you sort it out before HMRC issues a distraint notice or petitions for winding up your business. If you owe the VAT man money, don’t put it on the back burner. Call us today so that a qualified insolvency specialist can offer the help and advice you need to avoid penalties and offer a solution to your immediate problems.
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