Are you a VAT-registered business owner in the UK? Our comprehensive guide below simplifies the process of submitting your VAT Return to HMRC.

We clarify how often you must submit a return (typically every quarter) and what information it entails. You will learn the different methods for filing your VAT Return electronically, ensuring a smooth and efficient process, and understand the limited situations where a paper return might be an option.

We will also outline the time frame and methods for settling your VAT bill with HMRC, including whether you owe a payment or are due for a refund.

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Ensure your business operates within HMRC regulations with our efficient and reliable online VAT registration service. Secure your registration today for just £60 + VAT. Leverage our expertise as we submit your VAT application directly to HMRC through a secure government gateway.

HMRC will send your official VAT registration number and certificate to your registered business address upon approval.

Preparing and filing a VAT Return

Understanding and managing your VAT obligations is crucial for any VAT-registered business. A VAT Return is a tax document submitted to HMRC detailing your business's VAT activity for a specific period. It outlines:

  • Output VAT: The VAT you charge customers on your sales.
  • Input VAT: The VAT you paid to other businesses for qualifying purchases.

Frequency and Deadlines for Submission:

  • Standard VAT Returns: Typically submitted quarterly (every three months) with a deadline of 1 month and seven days after the accounting period ends.
  • Annual Accounting Scheme: Allows for one annual return, filed two months after your 12-month accounting period closes.

HMRC uses your VAT Return information to calculate your VAT liability. You will either:

  • Owe VAT: If your output VAT is higher than your input VAT.
  • Receive a VAT Refund: If your input VAT is higher than your output VAT.

Not all limited companies are automatically registered for VAT. Eligibility depends on your business's taxable turnover. However, if your business turnover is below the current VAT threshold, you should explore the potential benefits and drawbacks of voluntary VAT registration for your business, as there may be financial benefits.

How do I submit my VAT Return to HMRC?

Complying with Making Tax Digital (MTD) for VAT ensures efficient and accurate VAT return submissions for your business. This section clarifies the electronic filing methods available to VAT-registered businesses in the UK.

Filing Electronically: The Standard Approach.

Following the introduction of MTD for VAT, most businesses must now submit VAT returns electronically. Here are the primary options:

  • MTD-Compatible Accounting Software: Commercially available accounting software integrates seamlessly with MTD for a streamlined filing process.
  • Appointing an Accountant or Agent: Delegate the responsibility of VAT return submission to a qualified accountant or agent, ensuring expert handling.
  • VAT Online Account (Limited Use): For businesses using the VAT Annual Accounting Scheme, submitting returns directly through your HMRC VAT online account remains an option (select "Complete Return" under VAT).

Limited Exceptions for Paper Returns.

HMRC acknowledges situations where electronic filing might pose challenges. Paper returns are only permissible under specific circumstances:

  • Religious Objections to Computers: A paper return may be an option if your faith prohibits computer usage.
  • Accessibility Limitations: Businesses with limitations due to age, disability, or lack of internet access can potentially file paper returns.
  • Other Exceptional Circumstances: Provide compelling reasons why electronic filing is impractical (e.g., technical limitations).

Automatic Exemptions:

  • Businesses undergoing insolvency procedures (excluding Company Voluntary Arrangements and Individual Voluntary Arrangements) are automatically exempt from MTD for VAT and can file paper returns.

Importance of MTD Compliance:

  • Submitting a paper VAT return when electronically obligated can incur penalties of up to £400 from HMRC.

Understanding MTD for VAT ensures a smooth and compliant VAT return process. Choose Your Company Formations for expert guidance on VAT regulations and efficient business solutions.

How do I complete a VAT Return?

This section focuses on the core information you must provide, regardless of your chosen filing method (software, online, or paper).

Important Note: Not all businesses will complete every box on the VAT Return. Focus on the sections relevant to your specific business circumstances.

If you use MTD-compliant accounting software, the programme will automatically gather and populate many boxes based on your digital records, saving you time and effort.

Understanding Each Box:

Here is a breakdown of some key boxes and the information they require:

  • Box 1 (Output VAT): The VAT amount due on sales and services provided during the return period. This includes VAT on goods for personal use, staff supplies, and business asset sales.
  • Box 2 (NI Acquisitions VAT): This is applicable only to Northern Ireland businesses and covers VAT on goods and related costs purchased from EU member state suppliers.
  • Box 3 (Total VAT Due): The sum of Boxes 1 and 2, representing your total output VAT for the period.
  • Box 4 (Input VAT): The total deductible VAT you reclaimed on business purchases and services (including imported goods under postponed VAT accounting).
  • Box 5 (Net VAT Payment/Refund): This is calculated by subtracting the smaller figure (Box 3 or Box 4) from the larger one. A positive value indicates VAT owed to HMRC, while a negative value signifies a VAT refund due from HMRC.
  • Box 6 (Total Sales excluding VAT): The total value of your business sales and other outputs (excluding VAT). This excludes personal contributions, insurance claims, loans, and stock exchange transactions (unless you're a financial institution).
  • Box 7 (Total Purchases excluding VAT): The total value of your business purchases and expenses (excluding VAT), including imports, acquisitions from the EU, and "reverse charge" transactions.
  • Boxes 8 & 9 (EU Supplies & Acquisitions): These boxes are only relevant for Northern Ireland businesses and track the total value (excluding VAT) of goods and related costs supplied to or acquired from EU member states.

Once you have completed the relevant boxes, carefully review your entries for accuracy before submitting the VAT Return to HMRC.

For detailed guidance on each box, refer to GOV.UK resources. This breakdown equips you with the knowledge to navigate your VAT Return confidently.

What if you notice a mistake after you submit a VAT Return?

If you have noticed a mistake in your submitted VAT Return, while directly amending a return isn't possible, you can correct those errors in your subsequent filing. Here is what you need to do.

You can correct errors through adjustments in your subsequent VAT Return, provided the net value of the mistake falls within these limits:

  • £10,000 or less
  • Between £10,000 and £50,000, but less than 1% of your total sales value (Box 6 of the incorrect return)

Notify HMRC independently about any errors exceeding these limits:

  • Net value exceeding £50,000
  • Errors exceeding 1% of your total sales value, even if below £10,000
  • Deliberate errors (regardless of value)

To determine the net error on previous returns, calculate:

  • Total VAT owed to HMRC (if any)
  • Total VAT refunds due to you (if any)
  • Net Error = Additional VAT owed to HMRC - VAT refunds due to you

HMRC offers detailed guidance online for:

  • Correcting VAT return errors
  • Amending VAT records
  • Claiming VAT overpayments

Remember: Prompt action and clear communication with HMRC are key to resolving VAT return errors effectively.

Paying your VAT bill to HMRC

Following a submitted VAT Return, any outstanding VAT owed to HMRC requires prompt settlement. This section clarifies the payment process and potential implications.

Payment Deadlines:
  • Your VAT return will clearly display the due date for your VAT payment, which typically aligns with the filing deadline (one month and seven days after your accounting period ends).
  • Annual Accounting Scheme or Payments on Account: If you use these options, different deadlines apply. Payments on account are mandatory for quarterly VAT filers with a VAT liability exceeding £2.3 million in 12 months.
Convenient Payment Options:

Use your VAT online account (business tax account) to:

  • View VAT Return submission deadlines.
  • Track VAT payment due dates for clearing HMRC's account.
  • Review and potentially appeal any penalties.
Online Payment Methods:

Settle your VAT bill electronically via your VAT online account using these methods:

  • Online Banking: Approve the payment through your bank with online banking details.
  • Debit or Corporate Credit Card: Utilise a debit or business credit card for payment.
  • Direct Debit: Set up a Direct Debit for automatic VAT bill settlements.

Important Note: Always include your 9-digit VAT registration number during payments. This ensures proper business identification and accurate crediting to your VAT account.

Use HMRC's VAT payment deadline calculator to estimate the time needed for your payment to clear your account. Missing these payment deadlines can result in penalties.

VAT Refunds:

If you are due a VAT refund, HMRC typically processes the repayment within 30 days of receiving your VAT Return.

What if you cannot pay your VAT bill on time?

Unexpected delays happen, but failing to settle your VAT bill on time can lead to penalties. Contact HMRC immediately if you miss a deadline or anticipate late payment. You may be able to access the following solutions.

Payment Plans for Deferred Settlements:

  • Discuss setting up a "Time to Pay" arrangement with HMRC. This allows you to settle your outstanding VAT liability through instalments.

VAT Annual Accounting Scheme:

  • Eligibility & Online Returns: Since November 2022, online VAT returns have been mandatory for businesses using the Annual Accounting Scheme. This scheme suits firms with an estimated annual VAT turnover of £1.35 million or less.
  • Advance Payments & Annual Return: Joining this scheme involves making monthly or quarterly advance payments towards your VAT bill, followed by filing just one annual VAT Return.
  • Advance Payment Calculations: HMRC establishes advance payments based on previous VAT returns (for existing businesses) or estimations (for new VAT registrants).
  • Monthly payments equate to 10% of your estimated VAT bill.
  • Quarterly payments equate to 25% of your estimated VAT bill.
  • Balancing Payment & Refunds: Following your annual return submission, a final "balancing payment" is due. This settles the difference between your advanced payments and the actual VAT owed, as per the return.
  • Overpayments throughout the year can be refunded upon application to HMRC.

It is highly recommended that you consult with an accountant before joining the Annual Accounting Scheme. This scheme might not be ideal if you require frequent VAT reclaims, as refunds are only issued once a year following your return filing.

You can promptly address any VAT payment delays by understanding your options and potential consequences.

What happens if your VAT Return or payments are late?

Ensuring punctual VAT return submissions and settlements is crucial for your business. Late filings or payments can incur penalties and interest charges from HMRC.

For VAT accounting periods starting on or after January 1st, these potential consequences apply:

  • Late Payment Interest: Interest accrues on the outstanding VAT amount you owe.
  • Late Payment Penalties: Additional penalties may be imposed if your VAT bill remains unpaid by the deadline.
  • Late Submission Penalties: Failure to submit your VAT Return by the filing deadline could result in separate penalties.

The best way to reduce your risk of late payment is through careful record-keeping. Maintaining accurate and organised VAT records significantly reduces the likelihood of errors and delays. It may help you to hire an accountant to process your VAT returns. Professional assistance from an accountant can help ensure timely VAT filings and eliminate the risk of penalties.

Recommended further reading:

Complying with your tax obligations is essential for company officers. For more information, please read our guide, An Overview of the Taxes a UK Company Will Need to Pay and When.

Unsure if you need to register for VAT? Read our post: Do I Need to Register My Company for VAT? for help.

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