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5 Common VAT Mistakes: A Quick Guide for Small Businesses

29 August 2023
Luke Anderson
Ambitious Startups, Accounting & Compliance, Structuring a Business

VAT is a crucial aspect of financial management for all businesses; however, navigating the intricate world of VAT can be challenging, especially for small businesses.

In this quick guide, we will explore five of the most common VAT mistakes that small businesses often encounter and provide valuable insights on how to avoid them.

Late or Incorrect VAT Registration

One common mistake is failing to register for VAT on time or providing inaccurate information during the registration process.

Small businesses should monitor their turnover and register for VAT promptly when they exceed the registration threshold.

We cover this in detail in our previous blog Start-up Business VAT Registration.

Inadequate Record-Keeping

Accurate and organized record-keeping is vital for VAT compliance.

Failing to maintain detailed records of all VAT transactions, including invoices, receipts, and import/export documentation, can lead to errors and omissions in VAT returns.

Small businesses should invest in robust bookkeeping systems and regularly reconcile their records to ensure VAT accuracy.

Incorrect VAT Treatment

VAT can be complex, so its not uncommon to misunderstand or misapply VAT rules.

Small businesses should familiarize themselves with VAT rates & exemptions specific to their industry.

Common errors include charging the wrong VAT rate, applying VAT to exempt supplies, or failing to correctly handle VAT on international transactions.

One area where mistakes can easily occur is construction and property which we look into in our blog Property: Finding the VAT Advantage.

Seeking professional advice or consulting VAT guidelines can help avoid these errors.

Missing VAT Deadlines

Late submission of VAT returns and payments is a common mistake that can result in penalties and interest charges.

Small businesses should keep track of VAT deadlines and establish systems to ensure timely submission.

Utilizing software solutions or hiring an accountant to carry out your bookkeeping can help manage VAT obligations efficiently.

Insufficient VAT Reclaim

Finally, failure to maximize VAT reclaims.

Small businesses should identify and record all VAT incurred on business-related expenses, ensuring that they meet the necessary criteria for VAT recovery.

Proper documentation and understanding of the input tax rules can help avoid missing out on potential VAT reclaims.

There is also different rules relating to your first VAT return and pre registration expenses that you should take advantage of to ensure that you have maximised your VAT reclaim.


By addressing these five common VAT mistakes head-on, small businesses can enhance their financial management and achieve compliance with ease.

Whether you’re a budding entrepreneur or an established small business owner make sure you treat VAT with the care it deserves.

Getting it wrong can be costly!

Contact us

If you have any concerns or have a complex VAT  issue which needs addressing please contact Luke Anderson, our VAT expert, here at Friend & Grant Ltd.

Our Services

To read more about our services please see our related pages below:

Accounting & Compliance

Ambitious Start ups

Blogs related to Small Business VAT

Take a look at our other blogs on the topic of small business VAT:

Start-up Business VAT Registration.

Should I register for VAT?


The content in this blog is correct as of 29th August 2023. See terms and conditions.

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