The Business Secretary said the position was “a bit embarrassing” but stopped short of apologising. His fine reduced to £500 came about as he had failed to register for VAT once his personal income for speaking engagements and consultancy went over the statutory threshold for registration.
The embarrassing error has led to many commentators taking to Twitter to criticise Dr Cable, especially given his previous zero tolerance stance on tax dodgers.
Lord Sugar, said: “Vince Cable the business secretary who is banging on about people not paying taxes has been fined for not paying his promptly — POT/KETTLE.”
MP John Mann wrote: “Lib Dem tax expert should pay full fine for not knowing rules.” and Radio 5’s Victoria Derbyshire said: “His aide is quoted saying he acted ‘unknowingly’.”
How to not find yourself in Vince Cable’s position
Under HMRC rules, if your annual turnover of VAT-liable goods and services period exceeds the current threshold of £73,000, then you must register for the duty within 30 days.
Not registering for VAT when you have exceeded the threshold is an offence and, in addition to the VAT due, there may be penalty charges.
However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for exception from registration.
Once you are registered for VAT, you must keep certain business records and VAT records of your sales and purchases. You must also keep a separate summary of your VAT, called a ‘VAT account’.
There is no set way of keeping these records and accounts but in most cases, they can be adapted from your normal business records. The main thing is to ensure that they are complete and up to date and that it is easy for VAT officers to access them when you have a VAT inspection.
It’s important to make sure that staff in the business are aware of VAT deadlines and upcoming VAT changes and ensure that they understand the VAT company policy. Having a good level of understanding across the company will ensure the business doesn’t get caught out by the VAT man.
If you’re out on business a lot and don’t find yourself at the desk, put diary reminders on your mobile device so you know when important deadlines are coming up. This will provide a handy alert no matter where you are.
Keep a close eye on your turnover
The VAT threshold is applied on a 12 month rolling basis and so checking turnover against the VAT limit should be part of your regular monthly routine.
Get some decent financial software
Bookkeeping can be time-consuming if you rely on pen and paper records or have to wade through complex spreadsheets. With financial management software such as the newly launched QuickBooks 2012 it is easy to get an instant snapshot of your accounts and so easily check turnover against the VAT threshold at any point in the year.
If you are unsure where to start and want some further advice please get in touch with the HRMC directly – they have lots of information on the website and a number you can contact.
Diana Flier, Senior Compliance Analyst at Intuit UK, is a payroll and compliance expert with over 20 years experience in payroll systems and processes. In her role at Intuit, a leading provider of business and financial management solutions, she works closely with small businesses to help solve their financial management issues, particularly in the area of VAT compliance.