Once your business is registered for VAT, one of its main responsibilities is preparing and submitting VAT Returns to HM Revenue & Customs (HMRC). A VAT Return tells HMRC how much VAT your business has charged customers, how much VAT it has paid on qualifying purchases and whether you need to pay VAT to HMRC or are entitled to reclaim money.
Most VAT-registered businesses normally submit a VAT Return every three months. This period is known as the VAT accounting period. Even if your business has no VAT to pay or reclaim during a particular period, you will normally still need to submit a VAT Return if you are VAT registered.
Your VAT Return generally includes the VAT you have charged on sales, often referred to as output VAT, together with the VAT you are entitled to reclaim on qualifying business purchases, known as input VAT. The return also includes information about your total sales and purchases during the accounting period.
If the VAT you have charged customers is higher than the VAT you can reclaim, your business will normally need to pay the difference to HMRC. If the VAT you are entitled to reclaim is greater than the VAT you have charged, HMRC may instead owe your business a VAT repayment.
The deadline for submitting an online VAT Return is usually one calendar month and 7 days after the end of the VAT accounting period. This is normally also the deadline for paying any VAT owed to HMRC. Businesses should allow enough time for their payment to reach HMRC by the deadline.
For example, if your VAT accounting period ends on 30 June, the usual online filing and payment deadline would generally be 7 August. Your exact VAT Return and payment dates can be checked through your HMRC VAT online account.
Different deadlines can apply if your business uses a special VAT accounting arrangement. For example, businesses using the Annual Accounting Scheme normally submit one VAT Return for the accounting year and make payments during the year, with different final return and payment deadlines.
Accurate bookkeeping is essential when preparing VAT Returns. Your records should clearly show your sales, purchases, VAT charged to customers and VAT paid to suppliers. You should also keep appropriate VAT invoices and other supporting documents for amounts you intend to reclaim.
Businesses should make sure transactions are recorded in the correct VAT period. Missing invoices, duplicate transactions or incorrectly applied VAT rates can cause the figures reported to HMRC to be inaccurate.
Most VAT-registered businesses are also required to maintain digital VAT records and use compatible software to submit their VAT Returns. Keeping your bookkeeping software regularly updated and reconciling it with your business bank account can make VAT preparation significantly easier.
It is particularly important to check the VAT rates applied to your sales. The UK has standard-rated, reduced-rated and zero-rated supplies, while some supplies are exempt from VAT. Zero-rated and exempt supplies are not the same, and the distinction can affect both your VAT Return and your ability to reclaim VAT on business costs.
If your company sells several different types of products or services, you may need to apply different VAT treatments across different transactions. Incorrectly charging VAT can result in inaccurate invoices and create complications when preparing your return.
Businesses should also review the VAT they are reclaiming. VAT can generally only be reclaimed where the relevant costs meet HMRC’s requirements and relate to the business. Where something is used partly for personal purposes, only the qualifying business proportion of the VAT may usually be reclaimed.
If you discover a mistake in a previous VAT Return, the way it should be corrected can depend on the size and nature of the error. It is important not simply to ignore VAT errors, as they can affect future returns and the amount payable to HMRC.
Late VAT Returns and late VAT payments can also result in penalties and interest. Rather than waiting until the filing deadline, businesses should keep their bookkeeping updated throughout each VAT quarter so there is enough time to identify problems before the return needs to be submitted.
A useful approach is to reconcile your sales invoices, purchase invoices, bank transactions and VAT records regularly. This gives you a clearer picture of your expected VAT liability and can help prevent unexpected tax bills.
Businesses should also be careful not to treat VAT collected from customers as ordinary business income available to spend. Where possible, planning ahead for the expected VAT payment can help protect your company’s cash flow when the quarterly deadline arrives.
VAT Returns can become more complicated when your business has exempt sales, international transactions, imports, exports, multiple VAT rates or mixed business and personal expenses. Different VAT accounting schemes can also change how and when VAT is calculated.
At EasyFig, we help UK businesses organise their VAT records, review transactions and prepare accurate VAT Returns. Regular bookkeeping and VAT support can help you understand what your business owes and reduce the risk of missed deadlines or incorrect submissions.
Need help preparing your VAT Return? Book a free consultation with EasyFig today.