Why would you re-design a form to make it harder to use?
If your business is registered for VAT, you can join the flat-rate VAT scheme - instead of calculating all your VATable inputs and outputs, you just multiply your turnover by an assumed flat rate. It makes being VAT registered much easier.
Until it comes to filling out the VAT return. The online return used to be hard to use as the instructions by box 6 said to enter your turnover excluding VAT. But if you're on the flat-rate scheme, you were supposed to enter your turnover including VAT - even though it said not to. As a result, I wrote a guide to the online flat-rate VAT form.
The government redesigned the form earlier this year, to include these words by box 6:
If you use the flat rate vat scheme, in this box please enter the amount including vat, not excluding vat.
That was nice and clear. Here it is:
Old form
They've now redesigned the form again, and gone back to saying to enter the amount excluding vat at box 6, and removed the help text for people on the flat rate vat scheme. Like this:
New form
Why? I don't know. They are idiots. (The instructions elsewhere on the site are still clear: "Enter in Box 6 the flat rate turnover - including VAT - that you applied your flat rate percentage to.".)
I somehow feel compelled to take a stab at the maths. No doubt I'm oversimplifying but we'd need to know:
a) no. of flat rate VAT reg. businesses:
Total registered = 2M (http://www.statistics.gov.uk/cci/nugget.asp?id=1238)
I'm taking a stab at 10% are flat rate. So 200K businesses are on the flat rate scheme.
b) average income
50K (ex vat)? Too conservative?
c) avegage percent
Let's say 10%. May be a little higher.
Now, we have to work out what proportion of those businesses complete the VAT form incorrectly. This is a little more complicated as it's dynamic but some thoughts:
1) People who already complete the form will, in the main (but certainly not always), continue to do it correctly.
2) A proportion of newcomers to the scheme will get it right and others wrong.
So ... let's assume an average over a few years or so at 10% of the total users are filling out this form incorrectly.
HMRC should get = 200K x 50K x 1.175 (VAT) X 0.1 (flat rate) =
£1.175 BN
What it actually gets is 90% of the above + the amount paid by the ex-VAT 10% = 1.0575BN + (20K x 50K X 0.1) =
£1.1575 BN
The difference? £17.5M a year.
Assume, upside/downside of +/-40% means
A *broad* estimate of the inaccuracy is that it costs the UK Taxpayer £10-25M a year.*
* Disclaimer: It's not yet 9.30 so the maths above just might be horribly flawed!
I challenge anyone to report me as a benefit cheat on this form - https://secure.dwp.gov.uk/benefitfraud/ (obviously I am not actually asking you to do it) but I love some of the questions! I wonder if anyone actually fills any of it in!