VAT Mistakes Every Business Makes
Value Added Tax (VAT) can be daunting, especially for businesses that do not ordinarily operate in regions where the tax is applicable. Even sophisticated in-house tax teams can make bad calls and mistakes when trying to navigate compliance expectations across multiple jurisdictions, leading to non-compliance, reputational damage, and potential financial losses.
VAT IT Compliance is laser-focused on helping businesses of any size avoid costly blunders when it comes to their indirect tax obligations. Below, we’ve listed some of the most common mistakes to help you and your business.
VAT Registration Blunders
Businesses can expand globally in the blink of an eye thanks to the power of digital technology, ecommerce platforms, and interconnected supply chains. As they expand, they gain exposure to regulatory and legal requirements across multiple countries.
We often see two big mistakes in this regard, made by businesses large and small:
- Failure to register where such an obligation is triggered.
- Registering when you don’t have to because of a poor understanding of cross-border VAT rules.
You need to ensure you understand the VAT registration threshold in each country, as well as rules regarding specific goods and services. For example, if your taxable turnover in the United Kingdom exceeds 90,000 GBP, you should be registered right now.
Charging Incorrect Rates
Rates differ both within countries and across borders. It can be hard determining which rate you should charge if you’re moving goods from one place to another, and even harder to understand what reduced rates and exemptions may apply to your business.
Further complicating matters is the fact that rates are subject to constant change.
Companies like VAT Compliance make it their business to track regulatory and compliance expectations over time, investing dedicated resources to this task.
Mistakes with Invoicing
If you want to charge and reclaim VAT, you need to understand the basics of VAT invoicing. There are set requirements that tax offices look for when evaluating your invoicing practices. Are you referencing the right rules, applying the correct rates, and including all the information you need to avoid poor audit outcomes?
Things can get very complicated when it comes to the issuance of credit notes, or the correction of past mistakes. Unless you have reliable guidance rooted in both knowledge and experience, you may end up in a cycle of chaos and confusion!
When it comes to imports and exports, we often help clients resolve issues that prevent them from taking full advantage of existing regulations. This is an area where your business might be missing out on significant opportunities to reduce your overall tax liability.
Missing Opportunities to Reclaim VAT
The burden to pay VAT should fall on the shoulders of the final consumer. If you have a VAT payment obligation, it’s very likely you also have a VAT reclaim opportunity. Failing to take this opportunity disadvantages your business and its bottom line.
Avoiding Blunders, Getting the Right Advice
VAT IT Compliance can assist even the most sophisticated in-house tax teams to help ensure your business has specialist support with its indirect tax affairs. Whether you’re a small business or a large multinational, we have the skills and experience you need to remain compliant.
