How to File a VAT Return: Step-by-Step Guide for UK Businesses
Written by Lee Hart
Filing a VAT return is a regular task for many UK businesses, but it can seem confusing at first. To file a VAT return, a business needs to summarise its VAT sales and purchases, complete the online form, and submit the figures to HM Revenue and Customs by the deadline. Missing deadlines or making mistakes can lead to penalties, so attention to detail is important.
Anyone responsible for VAT must keep proper records, calculate the correct VAT amount, and use the right paperwork for submission. There are different VAT accounting schemes, and most businesses now send their VAT returns online, following rules set by HMRC. Even if a business has no VAT to pay or reclaim, a return must still be submitted.
Key Takeaways
- VAT returns require accurate figures and on-time online submission
- Proper records help avoid mistakes and HMRC penalties
- Most businesses must use digital systems to file VAT returns
Understanding VAT Returns
VAT returns play a crucial role for UK businesses registered for VAT. Filing on time helps avoid fines, and knowing the rules ensures the business stays compliant with tax requirements.
What Is a VAT Return?
A VAT return is a formal report submitted to HMRC. It shows the amount of VAT a business has charged on sales and the VAT paid on purchases for a specific period.
Businesses need to record all VAT on taxable sales and relevant purchases, including imports and exports. The return will show whether the business must pay VAT to HMRC or is due a refund.
Returns usually include the total sales and purchases, the VAT owed to HMRC, and any VAT a business can reclaim. Filing a VAT return is required even if there's nothing to report for the period.
Who Needs to File a VAT Return?
Any business or individual registered for VAT in the UK must file VAT returns. This includes limited companies, sole traders, and partnerships. Even if a business made no sales or purchases, a return is still required for every period.
Some schemes apply, such as the Flat Rate Scheme for small businesses or the Annual Accounting Scheme, which changes how often returns are filed.
De-registration from VAT removes the requirement, but outstanding tax returns must still be sent. For more on different schemes and filing requirements, see this guide to filing VAT returns in the UK.
Deadlines and Accounting Periods
The deadline for submitting a VAT return and payment is usually one month and seven days after the end of the accounting period. An accounting period is typically quarterly for most businesses but may be yearly for those on the Annual Accounting Scheme.
Missing a deadline can lead to penalties and interest charges. Marking calendar reminders and using Making Tax Digital software can help meet deadlines. For more information, visit the official page on VAT returns and deadlines.
Preparing for Your VAT Return
Getting ready to file a VAT return requires careful record keeping and organisation. This helps businesses avoid mistakes, penalties, and delays from HMRC.
Gathering Required Documentation
The first step is to collect all paperwork related to VAT for the period being reported. This means gathering invoices for sales, receipts for purchases, and import/export documents when needed. Every document should clearly show VAT amounts, supplier or customer details, and transaction dates.
It is important to include credit notes, debit notes, and any other adjustment records. If the business uses digital VAT software, these documents should be uploaded and sorted electronically. Physical paperwork must be kept in folders or files, ready for inspection.
HMRC may ask for proof of VAT paid or charged. Missing paperwork can cause claims or reclaims to be delayed. Businesses should review the official guidance on filling in a VAT Return to make sure nothing is missed.
Organising Sales and Purchase Records
All sales and purchase records should be kept in a structured way. Sales invoices should be separated from purchase invoices. Each should be sorted by date and type, for example:
Sales Invoices - Sales to customers
Purchase Invoices - Goods and services bought
Credit Notes - Returns or discounts given
Businesses should make sure all amounts match the business bank statements. This helps with accuracy and makes it easier if HMRC requests further checks.
If errors are found during organisation, these should be fixed before filing. Many small businesses use accounting software to automate this process. However, it is still important to check records for mistakes or missing data.
Reconciling Bank Statements
Bank statements should be matched with VAT records to ensure there are no discrepancies. Each payment in or out must relate to a matching invoice, receipt, or other record. Reconciling means double-checking that sales and purchases recorded actually went through the bank account.
Spotting differences early is important. Unmatched items may be errors, missing receipts, or duplicate payments. All should be investigated and explained. Keeping a simple checklist can help, such as:
- Match each statement line to an invoice or receipt
- Flag any unmatched items
- Note the reason for differences
Staying consistent with this process makes the final VAT calculation more reliable. For more details, check the process on how to send your VAT Return.
Calculating Your VAT Liability
To figure out how much VAT a business needs to pay or reclaim, it is important to know the totals for both VAT charged on sales and VAT paid on purchases. This involves careful record keeping and straightforward calculations.
Calculating Output VAT
Output VAT is the total VAT collected from customers when a business sells goods or services. Each time a sale is made that is subject to VAT, the correct VAT rate must be applied to the sale price. In the UK, the standard VAT rate is usually 20%, but some goods and services may be charged at 5% or 0%.
To calculate output VAT, keep a record of all invoices issued to customers. For each invoice, multiply the net sale amount by the VAT rate that applies. Add up the VAT from all sales during the VAT return period to get the total output VAT.
If a business uses a special VAT accounting scheme, rules may be different for some calculations as explained by HMRC in their VAT Notice 700/12.
Calculating Input VAT
Input VAT is the amount of VAT paid on goods and services bought for the business. Businesses can reclaim input VAT if these purchases are for business use and include valid VAT invoices from suppliers. VAT on some business expenses, like entertainment or certain vehicles, is not always reclaimable.
To calculate input VAT, collect all VAT invoices from suppliers within the period. List the VAT amount from each invoice and add them together to get the total input VAT for the return period.
Checklist for Calculating Input VAT:
- Gather all supplier invoices with VAT numbers.
- Confirm purchases are only for business use.
- Exclude any items where VAT is not reclaimable.
If the input VAT is greater than the output VAT, the business can claim a refund from HMRC. More details can be found in guides such as How to Calculate VAT Return in the UK and How to Do a VAT Return.
Completing the VAT Return Form
When filing a VAT return, a business must fill in each section of the form carefully and make sure that the figures reported are accurate. Even small mistakes can lead to delays or possible penalties from HMRC.
Entering Relevant Figures
The VAT return form includes several boxes that require different types of information. Each box must be filled in using details from sales and purchase records. For example, Box 1 asks for VAT due on sales and other outputs, while Box 4 is for VAT reclaimable on business expenses.
The most important thing is to use up-to-date sales invoices and purchase receipts. Sales invoices show how much VAT was collected from customers, and purchase receipts show how much VAT was paid to other businesses. Keeping clear, organised records is key to entering the right amounts in each box.
A business must report values for total sales (excluding VAT), total purchases (excluding VAT), and the total VAT owed or reclaimable. For help with each section of the form, there is official guidance on the UK government’s VAT return page.
Double-Checking Your Calculations
Before submitting the VAT return, it is important to check all calculations and entries. Mistakes such as transposed numbers or missing invoices can cause problems later. Many errors come from mixing up gross and net amounts or entering the wrong figures in each box.
Businesses should add up all sales and purchases again to be sure the totals match their accounting records. Using accounting software or MTD-compatible software can help catch errors and make corrections before submission.
It’s also helpful to review every supporting document, such as invoices and receipts, to confirm that every claim for VAT back is backed up by a proper record. Taking these steps makes it less likely to receive queries or face penalties from HMRC.
Submitting Your VAT Return
VAT returns must be submitted online using HMRC-recognised methods. There are different rules depending on the chosen approach and government regulations such as Making Tax Digital.
Choosing a Filing Method
Businesses in the UK now have limited options for submitting VAT returns. As of April 2022, it is mandatory for most VAT-registered businesses to use compatible software for filing returns. They are not allowed to use the old government online account.
There are two main filing methods:
- Using compatible accounting software: Most companies use accounting programmes that link directly with HMRC. The software sends the VAT return data straight to HMRC and provides an instant confirmation.
- Appointing an agent: Some businesses prefer to hire an accountant or agent, who then manages the submission using compliant software.
Paper returns are mostly reserved for people with an approved exemption by HMRC due to digital exclusion or similar reasons. Anyone else must use electronic filing options. For more guidance, check the steps at FSB's guide to submitting VAT returns.
Using Making Tax Digital (MTD)
Making Tax Digital (MTD) is a government initiative requiring businesses to keep and submit VAT records digitally. Since April 2022, nearly all VAT-registered businesses must use MTD-compatible software.
Key steps include:
- Choose MTD-compatible software: Software must be recognised by HMRC to comply.
- Authorise the software: The business must link the software with their government gateway account for secure submissions.
- Submit digital records: Instead of manual data entry, VAT return details come directly from digital business records.
- Check and submit: Double-check numbers before submitting. After submission, keep the digital confirmation receipt as proof. Full instructions can be found on GOV.UK’s guidance on submitting a VAT Return.
The MTD system reduces errors and keeps information consistent with HMRC records. Only those approved for exemption can avoid digital filing.
Paying and Reclaiming VAT
Businesses are responsible for paying any VAT they owe to HMRC and can also claim back VAT they have spent on eligible purchases. Keeping proper records and following the correct procedures is key to avoiding mistakes and delays.
Making a VAT Payment
After calculating VAT on sales and subtracting any reclaimable amounts, the business may have a payment due. The payment amount is shown on the VAT Return. This must be paid to HMRC by the deadline stated on the VAT account. Late payments may result in penalties or interest.
Businesses can make payments using online banking, direct debit, or other methods through their VAT online account. It is important to double-check all figures before submitting the return to avoid errors. Payment is not automatic; the business must make sure the funds reach HMRC in time. The business can use its VAT account to track returns and confirm when the payment has been received by HMRC. More details on sending a payment can be found in the official VAT guidance.
Claiming a VAT Refund
A VAT refund may be due if the business has paid more VAT on its purchases than it has collected from its sales. This often occurs for new businesses or businesses making high-value purchases. To receive a refund, the business must complete its VAT Return accurately, showing the difference between VAT paid on purchases (input VAT) and VAT collected on sales (output VAT).
Proper VAT invoices must support all claims. HMRC will process the refund after submission, often within 10 to 15 days. The refund is not automatic—accurate and timely filing is key, along with keeping invoices and proof of spending. For a step-by-step VAT reclaim process, visit the detailed guidance on claiming VAT back.
Correcting Mistakes on a VAT Return
Mistakes can occur when filing a VAT return. These errors may include entering the wrong figures, missing invoices, or listing transactions in the wrong period.
If a mistake is discovered before submitting the return to HMRC, it is best to delete the return, correct the data, and create a new one. Most accounting software lets users amend details before sending, keeping errors from reaching HMRC.
For errors found after submission, certain rules apply. HMRC allows businesses to correct VAT return errors for the previous four years. Corrections can be made on the next VAT return if the net value of the error is £10,000 or less, or between £10,000 and £50,000 but less than 1% of sales.
Steps to correct an error:
- Calculate the value of the mistake
- Record the adjustment on the next VAT return if within limits
- If over limits or involving fraud, notify HMRC directly
Some errors, such as intentional mistakes or repeated wrong entries, may result in penalties. Frequent or serious mistakes can increase the risk of interest charges or investigations, as explained in this guide from The Accountancy.
Anyone unsure about the type of error or the correction method should review HMRC’s guidance on correcting VAT errors.
Penalties and Compliance for VAT Filing
HMRC monitors VAT returns closely. Errors or late submissions can lead to penalty points or financial fines. Staying compliant helps avoid unwanted costs and keeps a business in good standing.
Common Filing Errors
Mistakes in VAT returns often lead to penalties or investigations. Frequent problems include entering incorrect figures, missing deadlines, or failing to include all sales invoices. Misclassifying goods and services or claiming unallowed expenses can also cause issues.
Some businesses report the wrong VAT period or submit returns with missing information. Double-checking figures and dates before filing can prevent many errors.
Below is a list of frequent mistakes:
- Filing for the wrong accounting period
- Entering incorrect VAT rates
- Not including all relevant sales or purchases
- Missing deadlines for submission
- Claiming VAT on ineligible items
Careful record-keeping and reviewing each return before submission can help avoid these issues.
Avoiding Late Submission Fines
HMRC uses a points-based system for late VAT returns. Each late submission earns a penalty point. After reaching a certain threshold—such as four points for businesses filing quarterly—a business will get a £200 fine. More details are outlined by HMRC on penalty points and late penalties.
Penalty points do not last forever. They are removed after all late returns are submitted and a period of compliant filing is completed. Depending on how often a business files VAT returns, this period can range from six to 24 months.
To avoid fines:
- Mark VAT deadlines on a calendar
- Set reminders for submission dates
- Ensure all returns, including nil returns, are filed on time
- Use software that tracks deadlines and sends alerts
Taking these steps helps businesses avoid penalty points and financial penalties for late submissions. For a detailed explanation of the due dates and penalties, visit this VAT return penalties guide.
Record Keeping Requirements
Businesses registered for VAT must keep accurate and complete records of their sales, purchases, and expenses related to VAT. Keeping these records is not just good practice; it is a legal requirement set by HMRC.
Records can be kept on paper, electronically, or as part of accounting software. If a business has a taxable turnover above £85,000, it must maintain a digital record of all information that goes into its VAT Return. This includes the date, value, and VAT amount of each transaction. More details on this can be found on the official government guidance.
List of records businesses should keep:
- Sales and purchase invoices
- Credit and debit notes
- VAT account (showing VAT charged and paid)
- Import and export documents
- Self-billing agreements (if relevant)
All records should be readable, complete, and up to date. Businesses are required to keep these VAT records for at least six years. HMRC can ask to see these records at any time, often during a VAT inspection. For more details, see keeping VAT records.
Below is a simple list showing what to record:
- Sales Records - Invoices issued, receipts
- Purchase Records - Supplier invoices, expense bills
- VAT Account - Summary of VAT charged/paid
- Import/Export Docs - Customs forms, shipping records
Organised record keeping helps businesses file VAT Returns correctly and avoid issues with compliance.
Seeking Professional Help With VAT Returns
Some people find VAT returns confusing or time-consuming. If calculations or rules feel too complex, they can work with a qualified accountant or tax adviser.
Professional help can make sure the return is correct and submitted on time. Experts know the current VAT laws and how to avoid mistakes that could lead to fines.
Benefits of using a professional:
- Ensures compliance with VAT regulations
- Reduces errors on the return
- Can help claim all eligible VAT reliefs
- Saves time on record keeping and filing
Mistakes can happen easily without expert support. A professional will double-check figures, check for missing information, and make sure all documents are complete.
Many accountants offer flexible VAT services. This could be ongoing support, a one-off check, or help when filing the first return. If someone needs extra guidance, asking for help soon is best to avoid last-minute stress.
To learn more about why professional advice can be useful, visit this guide on expert VAT assistance.
Frequently Asked Questions
Filing a VAT return in the UK involves understanding HMRC’s online system, knowing where to access forms, and being aware of key deadlines. Accurate completion of the return and being able to use examples or templates can help avoid errors.
What is the process for submitting a VAT return online via HMRC?
The business must use HMRC’s online VAT service. They need to sign up for an account if they do not already have one. After logging in, they follow the onscreen steps to enter their VAT figures and submit the return online.
All VAT returns must be submitted electronically unless HMRC has given specific approval for a different method. More step-by-step help can be found in HMRC’s official guide.
Where can I find a VAT return form in PDF format for HMRC?
HMRC prefers electronic submission for VAT returns, especially for Making Tax Digital (MTD) compliance. They do not widely provide downloadable PDF forms for filing purposes. However, businesses may find example PDF formats by searching for sample VAT forms, but these are for reference and not for official submission.
How should one correctly fill out the boxes on a VAT return?
Each box on the VAT return covers a specific area, like total sales, total purchases, and VAT due. The business must enter figures carefully by following HMRC’s instructions for each box. Special VAT schemes, such as the Flat Rate Scheme or Annual Accounting Scheme, may change how some boxes are completed.
A detailed explanation for filling each box is available from the official HMRC instructions.
What are the deadlines for submitting quarterly VAT returns?
Most VAT registered businesses must file quarterly returns. The deadline is one calendar month and seven days after the end of a VAT accounting period. Payment for any VAT due must be made by this same deadline.
Reminders and further details can be checked through HMRC’s website or through VAT software used for submitting returns.
Can VAT returns be filed on the 7th of the month?
Yes, filing on the 7th is allowed if it falls within the deadline. The deadline is commonly the 7th day of the second month after the quarter ends, giving time for calculation and payment.
If the due date falls on a weekend or holiday, payment and submission must reach HMRC on the last working day before the deadline.
Is there a template or example available for completing a VAT return?
Templates and worked examples are sometimes provided by accounting firms or found on bookkeeping websites. These help businesses see how to enter information in each box and avoid common mistakes. Businesses can review guides and example layouts for VAT returns in guides like this step-by-step explanation.
About The Author
Lee Hart
