If you’re running a successful business in the UK, you’re probably required to file a VAT return four times year, at the end of each quarter of your financial year. Thankfully, we’re well into the digital age, so you don’t have to try bringing out a box of receipts and papers. Most of your business records are likely to be digitized, which means you can easily file your VAT return online. We’re going to cover the basics around VAT as well as what you need to do to submit a return.
Understanding VAT return basics
As with most tax systems, Value Added Tax is applied to most goods and services as a primary income method for the government. You won’t find many tax fans in a population, but it’s essential for a well-run country. The standard VAT rate is 20%, but there are bands that reduce it to 5% and even 0% for some items and goods.
Individuals will generally file a single VAT return each year, but businesses are required to file four times year. Your return will contain the details on everything you earn and spend, as well as any VAT you owe or may be able to recoup.
How VAT returns went Digital
Over the last few years, Her Majesty’s Revenue and Customs (HMRC) has made a major push to bring everyone online in an effort to make it easier for everyone to file returns and claim back any owed VAT. This is known as “Making Tax Digital” (MTD) and is the core component behind making it possible to pay a Vat return online. As of April 2019, all VAT-registered businesses who have taxable sales in excess of the current established threshold (£85,000) are required to submit their returns digitally. This marked a huge shift in the way that businesses interacted with HMRC. Should your turnover fall below this threshold, you will still need to file a return in the specified way. You will either have to be exempt from MTD for some reason or de-register for you to stop using MTD-compliant systems.
When a business registers for MTD they will need to use specially developed accounting software that can link with HMRC’s systems. This can take the form of an app, or you can simply submit your VAT return directly from an Excel spreadsheet.
What your VAT return will contain
We’re going to cover what you can expect to see when completing a VAT return through HMRC’s online system. There are nine sections that you may or may not need to fill out depending on how your business has operated over the last period. e
| Area | Information |
| Section 1 | VAT due calculated from sales and other areas |
| Section 2 | Vat due calculated from purchasing items in Northern Ireland from EU member states |
| Section 3 | Sum of Section 1 and Section 2 |
| Section 4 | VAT to be reclaimed from purchases |
| Section 5 | Calculation of VAT owed or to be reclaimed from HMRC |
| Section 6 | Your total calculated sales and other outputs, ex-VAT |
| Section 7 | Your total calculated purchases and other inputs, ex-VAT |
| Section 8 | Value of sales of goods from Northern Ireland to Member States, ex-VAT |
| Section 9 | Value of purchases of goods from Northern Ireland to the Member States, ex-VAT |
This fields may change, or different information may be required if you’re using a special VAT accounting scheme.
My VAT return was late, am I in trouble?
You will only receive a penalty if you submit a late VAT return more than once during a financial year. This first time you are late, it will be marked as a “default” and no further action will be taken. Should you default more than once, you may find yourself receiving a penalty or fine. The size of this will depend on a few factors including:
- If your annual revenue exceeds £150,000
- What is the percentage of VAT that is still owed on the date the return was due?
