VAT is a tax which is charged on many goods and services provided by businesses in the UK. All VAT registered businesses must complete and submit VAT returns to Her Majesty’s Revenue and Customs (HMRC).

When do I need to complete a VAT Return?

From the date of registration, a VAT registered business charges VAT on their taxable sales (known as output VAT). They may be able to claim some of the VAT charged on their purchases and other expenses (known as input VAT).

The business must pay to HMRC the difference between the output VAT and the input VAT. However, if the input VAT is higher than the output VAT the business will be due a VAT refund, which is repayable by HMRC.

The business must inform HMRC of the VAT which is due to be paid (or refunded) by submitting a VAT return.

VAT returns usually cover a three month period and the relevant dates will be shown on the return, for example, 1 January 2017 to 31 March 2018.

How difficult is it to complete a VAT Return?

If your business is relatively simple, you may well find that you’re able to complete your VAT return each quarter without any help.

The rules and regulations which govern the treatment of VAT can be very complex. They are detailed in a lengthy document called the VAT guide; this can be found at https://www.gov.uk/government/publications/vat-notice-700-the-vat-guide/vat-notice-700-the-vat-guide 

You need to be aware that:

Further guidance on completion of the VAT return can be found on the GOV.UK website.

If you’re in any way unsure of how to complete the returns, it may be best to ask an accountant to do this for you.

What is the cash accounting scheme?

A business must pay to HMRC the difference between the VAT on their sales invoices and the VAT on invoices they have received. This is regardless as to whether or not the business has actually received or paid the money.

Under the cash accounting scheme, businesses pay to HMRC the VAT collected on payments received from customers, rather than the amount of VAT invoiced.  Input VAT is claimed on goods and services used, once payment has been made for them. Businesses are eligible to use the cash accounting scheme if their taxable turnover is less than £1.35 million per year.

If you're using the cash accounting scheme, the attached spreadsheet can be used to help you when completing your VAT return.

Calculate your VAT return.xlsx

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Quick guide to completing a VAT Return

These are the boxes of the VAT return that you will be asked to complete when you submit your VAT return online:

Box to be completedComments
Box 1 - VAT due in this period on sales and other outputsTo calculate the output VAT that is due for a period, the first step is to identify the total sales. The second step is to calculate the VAT. The total is divided by six - this amount is then entered into Box 1.
Box 2 - VAT due in this period on acquisitions from other EC Member StatesBox 2 is only used if items have been bought from other EC (European Community) countries, the figure will be taken from purchases, not sales. Multiply any purchases by the rate of VAT (20%). Often this box will be £0.
Box 3 - Total VAT due (the sum of boxes 1 and 2)Box 3 is the sum of Boxes 1 and 2, it is automatically calculated when the return has been completed.
Box 4 - VAT reclaimed in this period on purchases and other inputs (including acquisitions from the EC)The general rule is that VAT can be reclaimed by businesses on goods and services bought by the business that has been charged by the supplier, as long as the business makes standard, reduced or zero-rate supplies. Box 4 is the amount of VAT reclaimed from purchases and other expenses (input VAT). If any acquisitions from EC member states were included in box 2, this amount must also be included. 
Box 5 - Net VAT to be paid to HRMC or reclaimed by you (difference between boxes 3 and 4)Box 5 is the difference between boxes 3 and 4, it is automatically calculated when the return has been completed.
Box 6 - Total value of sales and all other outputs excluding any VAT. Include your box 8 figureBox 6 shows the total value of net sales for the period (excluding VAT). Do not include pence. This is calculated by subtracting the total sales from the VAT. 
Box 7 - Total value of purchases and all other inputs excluding any VAT. Include your box 9 figureBox 7 shows the total value of net purchases and expenses for the period (excluding VAT). Do not include pence.
Box 8 - Total value of all supplies of goods and related costs, excluding any VAT, to other EC member StatesBox 8 shows the total value of net sales (goods only) for the period (excluding VAT) to other EC member states. Do not include pence. This box is often £0.
Box 9 - Total value of acquisistions of goods and related costs excluding any VAT, from other EC Member StatesBox 9 shows the total value of net purchases for the period (excluding VAT) from other EC member states. Do not include pence. This box is often £0.

 

Submitted returnThe final return will look as follows: boxes 3 and 5 have been automatically calculated. 

How and when do I submit my return?

VAT returns must be submitted to HMRC online and any VAT that is due must be paid electronically. To use this service, you will need to register online to submit your VAT return.  

The due date for the submission of your VAT return and to make any payment due is is usually one month and seven days after the end of the VAT period. You can sign up to receive email reminders that your VAT return is due via your online account.

Can I correct my VAT Return if I find an error?

Net errors made in previous VAT periods can be corrected on later VAT returns if they are either:

  • £10,000 or less, or
  • £10,000 to £50,000 (but not exceeding 1% of your quarterly turnover)

A net error is the difference between the total errors in output VAT and the total errors in input VAT.

Next Steps

Read more on the Flat Rate VAT Scheme

If your business is registered for VAT, it’s worth knowing if you should join up for the Flat Rate Scheme. For some businesses it can simplify your accounting and save you money.

Read more

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