How to file a VAT return

Wondering how to file a VAT return? Luckily for you, we know how! While it might not be the most thrilling item on your to-do list, it’s essential if you’re VAT-registered. Get it right, and you’ll stay on HMRC’s good side, 😇 get it wrong (or worse, miss the deadline), and you could face penalties. But don’t worry, we’ll walk you through everything you need to know! 

What is a VAT return?

A VAT return is a report you send to HMRC, summarising the VAT a business has collected from customers (output VAT) and the VAT paid on business expenses (input VAT). 

The difference between these amounts determines whether you owe HMRC money or are due a refund. 🤑

Businesses that are VAT-registered must file a VAT return even if they have no VAT to report for the period. Returns are usually submitted every three months, in line with the business’s accounting period.

When is the deadline for a VAT return?

Most businesses file VAT returns every 3 months. The standard deadline for VAT returns is one month and seven days after the end of your VAT period. For example, if your VAT period wraps up on 31 March, your return and payment are due by 7 May. 📅

However, if you’re using a special VAT scheme, your deadlines might differ:

• Annual Accounting Scheme: file one VAT return a year, with advance payments throughout the year. 
• VAT Cash Accounting Scheme: the deadline remains the same, but VAT is accounted for based on when invoices are paid, not when they’re issued. 

Keeping track of your VAT deadlines is key to avoiding late fees and keeping HMRC at bay! So, make sure you know which rules apply to your business! ✅

What should I include in my VAT return?

When you file a VAT return, you must include:

Here are some special rules you should keep in mind when filing your VAT return:

• Partial exemptions: businesses that sell both VAT-exempt and VAT-taxable goods or services can only reclaim a portion of their expenses (input VAT).
• Adjustments: corrections or annual calculations may require changes to previous VAT returns. ✏️

Make sure you’re aware of these rules to ensure your VAT return is accurate and compliant.

Submitting VAT returns

Under Making Tax Digital (MTD, VAT returns must be submitted through compatible software – no more manual filings on HMRC’s website! 

Here’s how to get it done :

1. Log in to your MTD-compatible software 🔑
2. Check your VAT figures – mistakes happen, so give everything a once-over 
3. Submit your return – the software sends it directly to HMRC
4. Receive confirmation – you should get an instant receipt 📩

And that’s it! VAT return filed, HMRC happy, and you can get back to business. 

How to pay your VAT bill

Filed your VAT return? Nice work. 🙌 Now, don’t forget the most important part, paying HMRC on time! Here’s how you can do it:

• Direct Debit – set it up once, and payments happen automatically. Easy! 
• Online banking – pay via Faster Payments, CHAPS, or BACS.
• Debit/credit card – watch out for extra additional fees if using a credit card. 
• Standing order (for annual accounting schemes) – ideal for businesses on the Annual Accounting Scheme.

When should you pay?

Late payment of a VAT return

If you miss the deadline for a VAT return or fail to pay on time, HMRC may charge:

• Late payment interest: this accrues daily from the due date until the payment is received. 📈
• Penalties: based on how late the payment is and how often you miss deadlines.

Businesses that are struggling to pay their VAT bill may be able to set up an instalment plan, allowing them to spread the cost over an agreed period. 

What’s the penalty for a late VAT return?

Since 2023, HMRC has a points-based system for late VAT returns:

• Each late VAT return = 1 penalty point (you accumulate these until a threshold is reached
• Reaching the penalty threshold = £200 fine.
• Ongoing late payments? Expect daily fines.

Moral of the story? Make sure you file your VAT return and submit payment before the deadline.

If you’ve made an error

Oops, made a mistake? 🤦‍♂️That’s okay! You can usually correct the return depending on the type and size of the error:

• Small errors (under £10,000) – adjust it on your next VAT return.
• Larger errors (£10,000 – £50,000) – notify HMRC using a VAT652 form. 
• Serious errors (over £50,000) – report them directly to HMRC.

The sooner you fix it, the less likely you are to face interest charges or penalties.

Staying on top 

Filing a VAT return doesn’t have to be a nightmare. With MTD software, a solid process, and timely payments, you’ll stay compliant and stress-free. And if you’re ever unsure, a tax consultation with a professional accountant can help keep everything in order.