With small businesses operating as the backbone of any developing economy, often providing up to half of GDP (as in the UK), their longevity is of crucial importance to governments from all over the world. You’ll often read about incentives for small businesses, as their stability and growth are tantamount to not only tackling unemployment, but to providing a skilled and specialised workforce as well. When a small business starts earning well, with annual revenue exceeding the established earnings threshold, they are required to register for VAT and start to submit periodic returns and reports. The latest research suggests that up to 50% of SMEs make mistakes on their VAT returns, a staggering figure that has financial and administrative effects on the HMRC and the business itself.
Lack of Confidence in Filing VAT Returns
The data revealed that not even a third of small business owners were confident that they were filing their returns correctly, even though they may have spent over an hour checking the figures. Many small business owners, especially those that are VAT registered for the first time, don’t necessarily have the manpower, skill set or time capacity to work through the figures, often leaving it as a last resort as close to the deadline as possible. This is why it is becoming all the more important for them to consider working with a specialist in the process, to make it easier as a whole.
Time Spent on Checking Figures
Speaking of time spent checking the figures, on average, it is said that UK business owners don’t spend more than an hour and a half checking their figures, before sending their VAT return off to HMRC. If a business is in the process of expansion, if they are trading across borders, or have foreign tax obligations, the process can become overly complex, with a time commitment of less than 90 minutes simply not being enough to make sure everything is correct.
Overpaying and Fines
Another interesting finding from the research found that 27% of businesses overpaid on VAT and received money back. 18% of businesses received fines as a result of their mistakes. For many small business owners, cash-flow remains a primary consideration to keep in mind, with most being inherently pessimistic to the idea that they will have to pay in or be fined after doing a recon of their returns. Attitudes like these tend to be a stumbling block for both parties, as it often leads to procrastination, or a breakdown of communication, which delays the compliance process as a whole.
How To Make Sure You Stay VAT Compliant At All Times
If you haven’t got the time or capacity to work on your VAT compliance, there are some quick solutions for you to consider. In recent years, international VAT compliance companies, who handle all your VAT returns and deal directly with the tax authority in your country of operation and those you trade in, are on the rise. Vatglobal is fast becoming a household name in this regard, offering services to thousands of businesses across the world. They have specialists within key regions around the world, to stay abreast of all changes in local policy, but also to find the best ways for you to stay compliant. Next time you’re worried about making an error in your return, give them a call.