Tx notes fa22 Final

The default surcharge 
Geewizz Ltd’s first VAT return for quarter to 30 June 2022 was due on 7 August 2022 but was 
submitted late, on 20 August 2022 so HMRC will have issued a surcharge liability notice 
specifying a surcharge period running to 30 June 2023.
Although the second and third returns were submitted by the due dates of 7 November 2022 
and 7 February 2023 respectively, the VAT due was paid late in each case.
Surcharges of 2% and 5% will therefore have been charged. The surcharge period will have 
been extended to 31 December 2023.
If the return to 31 March 2023 is late, a surcharge at the rate of 10% will be imposed and the 
surcharge period will be extended to 31 March 2024.
(b)
Cash accounting scheme 
Geewizz Ltd can use the cash accounting scheme if:
‣
its annual taxable turnover does not exceed £1,350,000
‣
it is up to date with its VAT returns and VAT payments.
‣
The scheme will result in the tax point becoming the date that payment is received from 
customers. This should be advantageous where customers take extended credit periods 
since it delays the payment of output VAT until after the cash is actually received.
‣
It also provides for automatic bad debt relief should a customer not pay as if no cash is 
received no output tax will need to be paid. Input tax however may only be recovered if 
the payment has been made within the return period.
OR
Annual accounting scheme 
Geewizz Ltd can apply to use the annual accounting scheme if:
‣
its annual taxable turnover does not exceed £1,350,000
‣
it is up to date with VAT returns.
‣
Under the scheme only one VAT return is submitted each year, with nine monthly 
payments being made on account between month 4 and month 12 of the period, or 
quarterly payments on account. The payments are based on the VAT liability of the 
previous year, or in the case of a new business on an estimate of the VAT liability for the 
year. The balancing payment is due along with the VAT return two months after the end of 
the annual VAT period.
‣
The scheme can be beneficial since there is less administration involved in only preparing 
one VAT return each year. There is also less chance of incurring a VAT penalty and cash 
budgeting is made easier.

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