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VAT is a tax charged on many goods and services supplied in the UK. If your business is registered for VAT, you must keep VAT records and submit VAT Returns to His Majesty’s Revenue and Customs (HMRC).
Most VAT-registered businesses must keep digital VAT records and submit VAT Returns using Making Tax Digital (MTD)-compatible software. This guide explains how to review the figures on a VAT Return, understand what each box means and check that the information submitted to HMRC is accurate.
This handy VAT filing tool from ANNA Money helps you submit your VAT return from any Excel spreadsheet, instantly. Just upload your Excel spreadsheet, or add your details to their MTD-ready template, and ANNA will file your return for you – free of charge.
From the date of VAT registration, a business must account for VAT on its taxable sales (known as output VAT). It may also be able to recover VAT on qualifying business purchases and expenses (known as input VAT).
The difference between output VAT and input VAT determines whether VAT is payable to HMRC or whether the business is due a repayment.
Most VAT-registered businesses must use MTD-compatible software, which calculates these figures automatically. However, the business remains responsible for checking that the information submitted to HMRC is complete and accurate.
VAT Returns are often submitted quarterly, although some businesses may have different VAT periods. The relevant dates for the VAT period will be shown within your accounting software and on correspondence from HMRC.
Therefore, before filing a VAT Return, you should review the figures carefully to ensure that all sales, purchases and VAT adjustments for the period have been recorded correctly.
Most VAT-registered businesses must use Making Tax Digital (MTD)-compatible software to prepare and submit VAT Returns. While the software performs many of the calculations automatically, you remain responsible for ensuring that the information filed with HMRC is accurate.
Before filing your VAT Return, check that:
The rules and regulations which govern the treatment of VAT can be very complex and special rules may apply depending on your circumstances. For example, different VAT treatments can apply to:
Further guidance on completion of the VAT return can be found on the GOV.UK website. If you are unsure about any aspect of your VAT Return, consider seeking advice from an accountant or VAT specialist before submitting it to HMRC.
Under standard VAT accounting, VAT is usually reported based on invoice dates. This means a business may have to pay VAT to HMRC before it’s been received from the customer.
Under the VAT Cash Accounting Scheme, VAT is reported on the basis of payments and receipts instead. You account for VAT on sales when you’ve received money from customers, and you reclaim VAT on purchases when you have paid your suppliers.
You may be eligible to use the Cash Accounting Scheme if your business is VAT registered and your estimated VAT taxable turnover is £1.35 million or less in the next 12 months.
If your business uses the Cash Accounting Scheme, check that your MTD-compatible software is set up correctly before reviewing your VAT Return. In particular, make sure that:
If you are unsure whether the scheme has been applied correctly, consider asking an accountant or VAT adviser to review your VAT Return before submission.
As most VAT Returns are prepared using MTD-compatible software, you should review the figures before submission and confirm that they appear reasonable.
The table below explains what each box represents and what you should check.
| What each Box shows | What to check |
|---|---|
| Box 1 – VAT due on sales and other outputs | Check that all sales have been included and the correct VAT rates have been applied. Could include fuel scale charges, correcting errors and VAT due on imports accounted for through postponed and reverse charges. |
| Box 2 – VAT due on certain acquisitions and transactions requiring VAT to be accounted for | Many businesses will have £0 in this box as it applies to VAT due, but not yet paid, on acquisitions of goods made in Northern Ireland from EU member states. If it contains a value, ensure the underlying transactions have been treated correctly. |
| Box 3 – Total VAT due | Usually calculated automatically as the total of Boxes 1 and 2. |
| Box 4 – VAT reclaimed on purchases and expenses | Check that only recoverable VAT has been claimed and that appropriate VAT evidence is available. Could include bad debt relief and correction of errors. This figure will also include the VAT for postponed accounting and reverse charges if included in box 1, and any VAT actually paid on imports. |
| Box 5 – Net VAT payable to or reclaimable from HMRC | Usually calculated automatically. Confirm that the amount broadly matches your expectations. |
| Box 6 – Total value of sales and other outputs, excluding VAT | Check that turnover agrees with your accounting records for the VAT period. |
| Box 7 – Total value of purchases and other inputs, excluding VAT | Check that purchases and expenses have been recorded correctly. |
| Box 8 – Total value of certain goods supplied outside the UK that require reporting in this box | Many businesses will have £0 in this box as it applies to supplies of goods and related costs, excluding any VAT from Northern Ireland to the EU. |
| Box 9 – Total value of certain goods acquired from outside the UK that require reporting in this box | Many businesses will have £0 in this box as it applies to the acquisitions of goods and related costs, excluding any VAT, from VAT registered suppliers from the EU into Northern Ireland. |
Before submitting your VAT Return, review any unusual figures, significant changes from previous periods and any adjustments that have been made during the VAT period.
The VAT Return and any VAT payment are usually due one month and seven days after the end of the VAT period. For example, if your VAT period ends on 31 March, the filing and payment deadline will be 7 May.
VAT payments must normally be made electronically using MTD-compatible software.
Many accounting software packages provide reminders of upcoming filing deadlines, and HMRC may also send notifications through your online account. However, it remains the business’s responsibility to ensure that VAT Returns are submitted and any VAT due is paid on time.
If you discover an error after submitting a VAT Return, HMRC may allow you to correct it on a later VAT Return rather than submitting a separate error correction notification.
You can usually adjust a later VAT Return if the net value of the error is:
A net error is the difference between:
If the error exceeds HMRC’s correction limits, you will need to notify HMRC separately.
One of the benefits of reviewing your VAT Return carefully before filing is that it reduces the risk of needing to make corrections later.
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