What is a VAT Return and how do you file one?

If you have just registered for VAT then you will likely have been requested by HMRC to file a VAT return. Normally these returns are completed every three months but can be monthly if you expect regular VAT rebates or annual if you use the Annual Accounting method for VAT.

What is the purpose of VAT returns?

The purpose of the VAT return is to calculate the VAT that has been collected from customers by adding 20% onto your sales as required for VAT registered businesses. You can also reclaim any VAT paid out on your own invoices, due to the fact VAT is supposed to only be charged to the final consumer.

What do you need to include in a VAT return?

The VAT return is made up of nine boxes. First box you have the VAT on sales, this is all of the VAT you have collected on your sales.

Box two is VAT on EC acquisitions, so the VAT on anything purchased from the European Community.

Box three adds these together.

Next, box four has the VAT reclaimed on all purchases made.

Box five is the box that takes all of the VAT from box three and deducts box four, giving you the figure for the VAT that needs to be either paid or reclaimed from HMRC.

Box six contains the sales made minus VAT.

Box seven is purchases minus VAT.

Boxes eight and nine are the same as six and seven but for EC sales and purchases.

There is a great emphasis on accuracy where HMRC require the VAT return to be completed with no mistakes. If you do happen across any errors then these can be dealt with in two ways. Anything that makes a difference of less than £10,000 VAT can be adjusted in the following VAT return. Greater errors will need a VAT 652 form. You can check what you need to do using the following link: Tell HMRC about errors in your VAT Return – GOV.UK (www.gov.uk)

With the arrival of Making Tax Digital (MTD) for VAT the returns have become more streamlined for people using bookkeeping software. Many types of software are compatible with MTD and can generate and submit VAT returns based on the information entered into the software. This does mean that manual VAT returns can no longer be completed, which can cause problem for those less inclined to use computers and software. Luckily bridging software is also available which allows you to fill in a VAT return template then upload it to HMRC. You can find a list of compatible software on this link: Find software that’s compatible with Making Tax Digital for VAT – GOV.UK (www.gov.uk)

If you would like to learn more about VAT or other taxes, please check out some of our other blogs or get in touch with us.