VAT Worries!

Hey folks,

A worried man types this! I started my own Business as a sole trader a year and 7 months ago. My god i didnt realise how stressful it can be.

Since I started I havent really looked after the VAT the way I should, (an estimated payment here and there) let it slip due to family troubles and life in general! In the first year I had a turnover of 28k, and I am now trying to get myself back on VAT track, organising an accountant to do my returns every 2 months etc or even setting up a D/D for x amount to cover estimated vat and sort rest out at end of year.

My question is this, I am worried about the past year or so and impropper VAT payments and dont know what to do, ie hope nothing happens or what??

I dont need smart replies, I am looking for people who may have been in same position to help me sort my head out as it hurts at present!!!!

Thanks
Eoin

Revenue operate under the terms of its "code of Practice."

Where errors are made, than can impose penalties and interest is compulsory at a whopping circa 12% per annum. The bad news is the penalties can be 100% of the tax at risk. They will view this differently and allow mitigation depending on a number of factors, including whether you make a "prompted disclosure" i.e correct after they have contacted you, re for example an audit or an "unprompted disclosure" i.e where you notify them prior to any contact which is the better position to be in.


The good news is, and hopefully it applies, is that where you discover errors in previous returns submitted and where the tax underpaid is less than £5,000 per bi-monthly period, you can make a "self-correction" of any errors on your next return, without notifying Revenue and suffering interest or penalties.

My advice would be to sort it out asap, in case Revenue contact you and the option to "self-correction" would be gone.

You can arrange to pay your VAT by DD. Revenue's ROS system is handy. You must ensure that the DD payments are at least 80% of your final years VAT to avoid an interest charge.

This is not being smart, but who suggested to you that you register for VAT in the first place?

Based on the figure above, you seem to be below the VAT threshold and would have no VAT liability that I can see.

Presumably tax & PRSI returns are up to date?

Re last post.

Possibly elected to register to recover VAT on set up cost, eg VAN etc. If so, it might be best to stay registered or else excess of VAT reclaimed would have to be paid back.

Charging your customers VAT and then neglecting to send it to the Revenue (minus your own VAT outgoings) is a serious error. You say you've organised an accountant to take care of this from now on. Have you told this accountant of your past problems and asked for his/her advice?

If your turnover was only 28k (ex VAT, I assume) you're only talking about about a maximum of 6k in VAT. You've made some "estimated" payments, so the total is less than that, far less if your own VAT outgoings were large. Best to sort it out quickly and avoid the penalties.

Hoping that nothing happens, that the Revenue won't notice, is asking for trouble.