VAT Returns: What Can Go Wrong - Arnold Hill & Co.

VAT returns can seem straightforward, until something goes wrong. And when it does, it’s usually time-consuming, stressful and can be costly.

Here are the most common VAT mistakes we see and how we help clients avoid them.

Mistake 1: Missing VAT deadlines

What can go wrong:

• Late filing = penalties and interest.

How we prevent it:

• We use monthly or quarterly spreadsheets tailored to each client’s VAT period.
• We hold meetings to check where the team is at with their clients in the related VAT quarter.
• Automated reminders are set up for the team and we regularly send reminder emails to clients, so no deadline is missed.
• All submissions go through a centralised process to ensure consistency and timeliness.

Mistake 2: Incorrect VAT calculations

• What can go wrong:

  • Applying the wrong VAT rates (e.g. using the standard rate instead of reduced or zero-rated).
  • Misclassifying expenses or double-counting invoices.

  These errors can lead to HMRC scrutiny, audits or even fines.

  How we prevent it:

  • We run regular checks on client data using integrated accounting software like Xero.
  • Our team cross-references all inputs and outputs to catch anomalies.
  • Every VAT return is reviewed by a senior team member and the client before it’s submitted.

Mistake 3: Missing or invalid invoices

What can go wrong:

• If an invoice is missing or doesn’t meet HMRC’s requirements, you can’t reclaim the VAT.

This can significantly reduce your VAT refund or increase your liability.

How we prevent it:

• We give clients clear, simple guidance on what an acceptable VAT invoice should include.
• Each month, we carry out reviews to identify any missing or non-compliant invoices.
• We follow up proactively, so nothing slips through the cracks.

Mistake 4: Reclaiming VAT on Non-Recoverable Items

What can go wrong:

• Some goods and services, like business entertainment or certain vehicles, are not eligible for VAT recovery. Reclaiming VAT incorrectly can lead to penalties if discovered during an audit.

How we prevent it:

• We provide clients with clear, ongoing guidance on which items are and aren’t eligible for VAT recovery.
• Our working papers and internal reviews are designed to flag any unusual or potentially non-recoverable claims.
• All questionable items are escalated to senior staff before submission.
• We also ensure the client provides a clear explanation of what the VAT claim relates to.

Mistake 5: Ignoring VAT on Reverse Charge Transactions

What can go wrong:

• For services or goods received from abroad, the reverse charge mechanism often applies. Failing to apply it correctly can lead to underreported VAT and potential penalties.

How we prevent it:

• We identify and flag any reverse charge transactions during our regular reviews.
• Our team is trained to recognise when the reverse charge should be applied, especially for overseas suppliers.

Mistake 6: Failing to Register for VAT on Time

What can go wrong:

• If your business exceeds the VAT threshold and you don’t register on time, you could face backdated VAT charges, interest, and penalties.

How we prevent it:

• We closely monitor our clients’ turnover and alert them as they approach the registration threshold.
• Our team handles the registration process promptly to ensure full compliance with HMRC requirements.

Get in Touch

VAT doesn’t need to be a headache - but without the right processes, it often becomes one.

Good VAT returns start with good processes. From deadlines to data checks, our systems are built to take the stress out of VAT compliance. With the right support, you can avoid costly errors and stay on the right side of HMRC.

By combining robust systems with proactive support, we help our clients file accurate, timely returns and avoid unnecessary penalties. Whether you’re dealing with tight deadlines, complex transactions, or HMRC compliance, our team makes VAT straightforward and stress-free.

If you’d like peace of mind that your VAT is in safe hands, book a free consultation with us today and discover how we can support your business.

Author, Molly Saunders - Outsourced Finance

Molly.Saunders@ArnoldHill.co.uk