VAT pitfalls

With the complexity of the VAT laws it’s understandable that businesses make VAT mistakes.

However, these mistakes can be very costly both in terms of paying the wrong amount of VAT and also triggering a VAT investigation. We have created a list of the top 20 most common VAT pitfalls and then ranked them by their potential financial impact. 

1 = biggest impact, 20 = some impact but not as great.

  1. Not considering that HM Revenue & Customs (HMRC) might be wrong
  2. Trusting that all transactions with foreign customers are VAT-free
  3. Being fearful of challenging HMRC’ decisions
  4. Leaving VAT planning until the 11th hour
  5. Not opting to tax when you should, or opting to tax when you shouldn’t
  6. Not realising you are partially exempt
  7. Relying on the partial exemption standard method to your disadvantage
  8. Not pre-planning to ensure that you qualify for a relief
  9. Forgetting the impact of the capital items regime
  10. Not pro-actively managing your VAT affairs
  11. Not reviewing your company car policy
  12. Claiming import VAT from freight agent’s invoice
  13. Not retaining evidence of movement of goods
  14. Trading abroad and not considering other countries’ VAT/tax systems
  15. Not achieving optimum advantage from VAT registration
  16. Forgetting the impact of stamp duty
  17. Forgetting to claim bad debt relief
  18. Not claiming other reliefs
  19. Being ‘out of time’ or missing deadlines
  20. Not understanding the extent of your elections

The next step

If you know of other VAT pitfalls or you disagree with our rankings, please let us know what you think by getting in touch using the form below.

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