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VAT: How does it interact with other taxes?

Shared from Tax Insider: VAT: How does it interact with other taxes?
By Andrew Needham, August 2021

Andrew Needham looks at how a VAT assessment can affect other taxes as well. 

If a business makes an error and overpays or underpays VAT, it can result in a repayment of VAT or an assessment for underpaid VAT plus interest and penalties. In certain circumstances, this can affect the bottom line profits of a business and impact its direct tax liabilities. 

There are some obvious circumstances where a business has, for example, suppressed its takings, so a VAT assessment based on under-declared takings would result in an increase in the business’s takings and therefore increased profits and an additional direct tax liability as well; either income tax or corporation tax, depending on whether the business was incorporated or not. 

The right to a refund of VAT typically arises following a change of view

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