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