Guide to VAT Tax Returns

If you’re a registered business in the UK and have a VAT taxable turnover of over £85,000, you’ll need to register for VAT and complete a quarterly VAT return.

Find out everything you need to know about VAT tax returns from how to file them to the VAT accounting schemes currently available that your business may benefit from.

What is a VAT tax return?

Once your business has registered for VAT, you’ll need to charge the correct amount of VAT on any taxable sales – this is called output VAT -, but you may be able to claim back some of the VAT charged on purchases or expenses – this is known as input VAT.

Businesses are required to pay the difference between output and input VAT to HMRC, however if the input is greater than the output, you’ll be due a VAT tax refund by HMRC. In order to pay or receive a refund, your business will need to submit a VAT tax return.

How often do I need to submit a VAT tax return?

All businesses are required to submit a VAT tax return at the end of each accounting period which is every 3 months (quarterly) so, you’ll submit four per year. It’s important to note that you’ll need to put the relevant start and end dates on each VAT tax return.

How do I submit my VAT return?

You’ll need to file your quarterly VAT return online on the HMRC website, as per the new making tax digital rules. There are certain circumstances where you may be exempt from submitting online, including if you object to using computers on a religious basis or if you live somewhere without internet access. Full details of who are exempt can be found on the Government’s guide to VAT returns.

Once you’re on the HMRC website, you’ll need your VAT number and the login for your Government gateway account to hand. Then, it’s a case of filling out the form and submitting it.

Different VAT rates

It’s important to note when doing your VAT tax return that not everything is taxed at the same rate. The standard rate is 20% which is applied to most goods and services, the reduced rate is 5% which is for certain goods and services such as children’s car seats and home energy, then there’s also a 0% rate which applies to most food and children’s clothes.

VAT tax return penalties

If you don’t pay your quarterly VAT return on time or you happen to include errors, the penalties can be quite extensive.

  • If you send a VAT tax return that contains a careless error or deliberate falsification, you can be given a penalty of up to 100% of any tax that’s been under-stated or over-claimed
  • If HMRC sends you an assessment that’s too low and you don’t inform them that it’s incorrect within 30 days, you may face a penalty of 30% of an assessment
  • Submitting a paper VAT return instead of an online one can land you with a £400 fine (only if you’re not exempt from doing an online one)

VAT accounting schemes

If you’re looking to simplify your VAT accounting, there are certain schemes you may be able to register for with your business. Some of the most popular ones are as follows:

Annual accounting

With annual accounting, you’ll only submit one VAT return per year and you’ll make advanced payments throughout the year, based on your last return (this will be estimated if you’re new to VAT). This option is a great choice if you don’t expect regular VAT repayments and if your estimated VAT turnover for the next year is less than £1.35 million.

Flat rate scheme

With a flat rate scheme, the VAT is based on a fixed percentage of your sales – the percentage of which will depend on your business type. However, you won’t be able to claim back the VAT on purchases, except on certain capital assets over the cost of £2,000. This scheme is available to those with a VAT turnover of £150,000 or less, excluding VAT.

Cash accounting

This scheme allows you to pay VAT on any sales when the customer pays you, then you reclaim the VAT on purchases once you’ve paid your supplier. You’ll be eligible for this scheme if you have a VAT turnover of less than £1.35 million.

How SixtyFour8 can help

If the world of VAT tax returns has boggled your brain, don’t worry, we can help! Our team of dedicated personal accountants are experts in their field and understand everything there is to know about VAT returns. So, whether you want assistance in completing your quarterly VAT return or advice on which VAT accounting scheme may suit you best, our team are happy to help.

Call us on 01633 288 299 or get in touch today for a personalised quote.

Want more accounting advice to help with your business? Read our guide on domestic reverse charges for construction services, next.