AAT TPFB common mistakes

Apply both tests explicitly and separately. Backward look: taxable turnover in the previous 12 months (not the calendar or tax year) exceeds the threshold. Forward look: taxable turnover in the next 30 days alone is expected to exceed the threshold. 'Taxable' means standard-rated, reduced-rated AND zero-rated; it excludes exempt supplies and supplies outside the scope of VAT.

Anchor the distinction to the customer invoice: zero-rated supplies are taxable supplies at 0%, must still be shown on a VAT invoice with a VAT number, and related input tax is recoverable. Exempt supplies are outside the scope of VAT charging, need no VAT invoice, and related input tax is normally blocked. Note that 'outside the scope' items are a third category again.

Memorise the compulsory content checklist and test every invoice against it: the words 'VAT invoice', a unique sequential number, the supplier's name, address and VAT registration number, the customer's name and address, the tax point (time of supply), date of issue, description and quantity of goods or services, the rate of VAT and the VAT-exclusive amount per rate, the total VAT-exclusive charge excluding VAT, the rate of any discount, and the total VAT charged. For invoices over £250 all of this is compulsory; for retail-style invoices under £250 a reduced set applies.

Learn the definitions literally. Box 6 is total sales and other outputs excluding VAT - it includes standard, reduced, zero-rated, exempt, and (for most businesses) sales of capital assets; it excludes the VAT itself. Box 7 is total purchases and expenses excluding VAT - including zero-rated purchases, exempt purchases, acquisitions, and goods removed for own use or given as gifts. If either box is understated, the net VAT position is unaffected but the return is still wrong and the figures feed partial exemption and the turnover tests.

Before adding a figure to Box 4, run three checks. (1) Is the item on the blocked list - cars available for private use (unless exclusively for business, e.g. pool cars), business entertaining of UK clients, purchases for private use, and non-business expenses? (2) Is the business partly exempt - if so apply the standard method or an agreed special method, and account for the annual adjustment and de minimis limits. (3) Is the business partially non-business - apportion by an appropriate and defensible method. Only the recoverable element goes into Box 4.

Always work in the pay-period figures: monthly and weekly primary and secondary thresholds and the upper earnings limit as published for the tax year, not the annual amounts divided roughly. Match the category letter to the employee's circumstances: A for standard, B for married women or widows holding a valid certificate, C for employees over State Pension age (no primary NIC), H for apprentices under 25 on qualifying earnings, J for deferment, M and Z for under-21s, X for those with no NIC liability. For the Employment Allowance, check eligibility (limited companies with a single director with no other employee do not qualify, and it is a de minimis State aid consideration) and confirm it is being set against secondary Class 1 NIC, not primary.

Memorise the SSP structure: three unpaid qualifying days, then payment from the fourth qualifying day, at the statutory rate, with the employee earning at least the lower earnings limit. For the family payments, check in this order: continuous service (26 weeks into the qualifying week for SMP/SPP/ShPP/SPBP, 25 weeks for SAP), average earnings at or above the lower earnings limit, correct notice and evidence. Pay at the statutory rate or 90% of average earnings where that is lower, and apply the correct recovery percentage and small-employer rules for the tax year in question.

Decide on the basis before running the payroll. A cumulative code (no suffix) gives the employee the full year's free pay to date and can produce a refund; a W1/M1 or X suffix code taxes each period in isolation with no year-to-date effect. For a new starter with no P45, take a starter declaration: statement A usually gives the standard cumulative code, statement B gives a cumulative code with the previous pay and tax carried forward, statement C gives BR (all taxed at 20%) - and 0T is used where the employer has no basis to give any personal allowance. Use BR on a second job only when instructed by a P45 or by HMRC.

Treat the FPS as part of the pay run, not a follow-up: it must reach HMRC on or before the date the employee is paid, and a late FPS can trigger a late filing penalty. If a mistake is found, send a corrected (amended) FPS for the same period rather than an additional one, using the correct amendment indicator, and for earlier tax years use an Earlier Year Update. When an employee leaves, the final FPS must carry the leaving date so the P45 can be produced and HMRC's records close. Use an Employer Payment Summary by the 19th of the following month to report a nil payment period, statutory recoveries, or to reduce the amount due.

Learn the deadline pair: electronic payment by the 22nd of the following month (the 19th if paying by post, and allow for cleared funds). Check whether the employer is eligible to pay quarterly (average monthly liability below the small threshold). Before paying, reconcile the liability from the payroll software to the FPS totals plus any EPS reductions, and remember that nil-payment months still need an EPS, not a payment. Late payment attracts interest and, for repeated lateness, a penalty.