How do I review my VAT Return before filing?

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:

• all sales and income for the VAT period have been recorded
• all qualifying purchases and expenses have been entered correctly
• the correct VAT rates have been applied
• any VAT adjustments or corrections have been included
• the figures shown on the VAT Return appear reasonable when compared with your accounting records.

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:

• reduced-rate and zero-rated supplies
• exempt supplies
• business and private use
• overseas transactions
• bad debt relief
• specialist VAT schemes, which are available to some businesses:
  • Flat rate scheme
  • Cash accounting scheme
  • Annual accounting scheme
  • Retail schemes

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:

• VAT on sales is included only when customer payments have been received
• VAT on purchases is reclaimed only when supplier payments have been made
• unpaid invoices have not been included incorrectly
• any transactions excluded from the scheme have been treated correctly.

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.

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:

• £10,000 or less; or
• between £10,000 and £50,000, provided it does not exceed 1% of the value of your sales shown in Box 6 of the relevant VAT Return.

A net error is the difference between:

• VAT that should have been declared to HMRC (output VAT); and
• VAT that should have been reclaimed (input VAT).

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.