How to Complete Your VAT Return

Introduction

Completing your VAT return accurately is essential to avoid penalties and ensure you pay the correct amount of VAT to HMRC. Most VAT-registered businesses must submit their returns using compatible software, which compiles figures from your digital records, though some exemptions exist. This guide walks you through each box on the VAT return, explains what information you need, and clarifies the common VAT terms you'll encounter.

Before You Start: VAT Record Keeping

To complete your VAT return accurately, you need to maintain proper records of all your business transactions. Your VAT return will cover a specific VAT period – for example, if you submit quarterly returns ending on 31 March 2018, your return will cover 1 January 2018 to 31 March 2018 and be called period 03/18.

The top of your return shows the inclusive dates that the return covers, so you'll know exactly which transactions to include.

How to Submit Your VAT Return

Virtually all VAT-registered businesses are required by law to submit their returns via functional compatible software and pay electronically. Your software provider will give guidance on how to submit your return using their product.

If you're exempt from the requirement to keep digital records, you don't have to submit a software return. You can submit it online instead. However, if you cannot file online, HMRC will offer you an alternative. If you're entitled to file a paper return, HMRC will send you one.

Understanding Common VAT Terms

Before completing your return, it helps to understand the terminology:

Supplies are the sales of goods or services you make in your business. All goods and services subject to VAT (at standard-rate, reduced rate or zero-rate) are called 'taxable supplies'.

Output VAT is the VAT you charge and collect from your customers on goods or services going out of the business. These sales are known as outputs.

Input VAT is the VAT you can reclaim on amounts paid to your suppliers for goods and services that you buy for your business. These purchases are known as inputs.

Tax point refers to the time when a supply of goods or services is treated as taking place. You must account for VAT in the VAT period that the tax point occurs in, at the rate in force at that time (unless you use the Cash Accounting Scheme).

Tax due or repayment: Your return asks you to record the output VAT payable to HMRC and the input VAT you can claim back. If output VAT is greater than input VAT, you'll owe the difference to HMRC (a tax due return). If input VAT is greater than output VAT, you'll be due a repayment from HMRC.

Completing a Paper Return (If Applicable)

If you're submitting a paper return, the form is designed to be read by a machine, so you must:

• Use black ink
• Write within the lines of the boxes
• Write 0.00 (or 0 if no pence is required) if a box doesn't apply – don't strike through it or write anything else
• Not enter more than one amount in any box
• Not enter a minus sign in box 5
• Not attach anything to the return

Box-by-Box Guide to Your VAT Return

Box 1: VAT Due in the Period on Sales and Other Outputs

Include the VAT due on all goods and services you supplied in the period covered by the return. This is your 'output VAT' for the period.

You should also include VAT due on supplies outside the mainstream of your business (but not exports or dispatches, as these are zero-rated), including:

• Fuel used for private motoring where VAT is accounted for using a scale charge
• The sale of stocks and assets
• Goods you take out of the business for your own private use
• VAT due under reverse charge accounting and the gold scheme
• Supplies to your staff
• Gifts of goods that cost you more than £50 (excluding VAT)
• Distance sales to Northern Ireland above the distance selling threshold
• Commission received for selling something on behalf of someone else
• VAT shown on self-billed invoices issued by your customer

Also include VAT due in this period on imports accounted for through postponed VAT accounting.

Points to remember: Deduct any VAT on credit notes issued by you from this figure.

Special VAT Accounting Schemes

If you're using a special VAT accounting scheme, you'll need additional guidance. These schemes include:

• Flat Rate Scheme for small businesses
• Cash accounting
• Annual accounting
• Margin schemes for second hand goods, works of art, antiques and collectors' items
• Payments on account
• Reverse charge accounting

If you use a retail scheme to work out VAT on your sales to the public, separate guidance applies.

Imports, Exports and International Trade

Imports are goods and related costs you buy for your business from suppliers outside the UK, or if you're bringing these into Northern Ireland, from outside the EU. You can reclaim any VAT you pay on these goods as input VAT, depending on the normal rules.

Acquisitions are goods you bring into Northern Ireland from EU member states. You may have to account for VAT, but you can also recover that VAT as input tax.

Exports are goods supplied from England, Scotland or Wales to customers outside the UK, or goods supplied from Northern Ireland to customers outside the EU. These supplies are normally zero-rated.

Dispatches or removals are goods you supply to customers in an EU member state that are dispatched or removed from Northern Ireland. Goods leaving Northern Ireland to go to an EU member state are not called 'exports', but are dispatches or removals.

Partly Exempt Businesses

If you make, or intend to make, both taxable and exempt supplies and you have to pay input VAT that relates to both kinds of supply, you're classified as 'partly exempt'. Your recovery of input VAT in such circumstances is subject to the partial exemption rules.

Getting Help with Your VAT Return

If you cannot find the answer to your query in HMRC's published guidance, you can contact the VAT general enquiries helpline. The helpline deals with general questions about HMRC rules and procedures, rates of VAT chargeable on particular goods, and requests for publications or forms.

The helpline cannot deal with case-specific transactions such as clearing an existing debt, the progress of VAT registration applications, or matters arising from an HMRC visit – these should be directed to the relevant department.

For detailed questions or case-specific transactions, you should write to or email HMRC. You can also get help from members of the tax accountancy profession, though there's no requirement to employ an accountant. Responsibility for the accuracy of your VAT affairs remains with you as the taxable person.

Sources

• How to fill in and submit your VAT Return (VAT Notice 700/12)
• VAT guide (VAT Notice 700)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.