If your business is VAT registered, you’re required to submit a VAT return to His Majesty’s Revenue and Customs (HMRC). But what exactly does this involve, and how do you make sure it’s done correctly? In this guide, we’ll cover everything you need to know about VAT returns, how they work, and why using a professional consultancy like Cloud Co Books can save you time, stress, and money.
Understanding a VAT Return
A VAT return is a report that shows how much VAT you’ve charged on sales (output VAT) and how much you’ve paid on purchases (input VAT) within a specific accounting period. It helps HMRC determine whether your business needs to pay the difference to HMRC or whether you’re due a refund.
If you’ve paid more VAT on your purchases than you’ve charged to your customers, you can reclaim VAT. If it’s the other way around, you’ll have VAT to pay.
Why is a VAT Return Important?
A VAT return plays a crucial role for both the business submitting it and the tax authority reviewing it. Here’s why it matters:
Ensuring Legal Compliance: In jurisdictions where Value-Added Tax applies, any business that is VAT registered must submit VAT returns within the prescribed deadlines. Failing to file can lead to financial penalties, interest charges, or even legal action.
Supporting Accurate Financial Records: VAT returns act as a detailed record of a business’s taxable sales and qualifying purchases, making it easier to maintain precise accounting records and comply with tax laws.
Optimising Cash Flow: By completing a VAT return, businesses can offset the VAT paid on goods or services purchased against the VAT charged on sales. This process not only helps track VAT liability but also ensures that eligible businesses can reclaim what’s owed, improving overall cash flow management.
When and How to Submit a VAT Return
Businesses must submit their VAT returns quarterly or annually, depending on their VAT scheme. The deadline for submitting a return online is usually one calendar month and seven days after the end of your accounting period.
Thanks to HMRC’s Making Tax Digital rules, all VAT-registered businesses must keep accurate records and file VAT returns using accounting software. This is where Cloud Co Books can step in to manage your VAT accounting, ensuring you meet every deadline and comply with UK VAT laws.
Completing a VAT Return
Completing a VAT return involves:
- Calculating VAT due on sales (output VAT).
- Calculating VAT reclaimable on purchases (input VAT).
- Working out the amount of VAT due to HMRC or your refund amount.
The VAT return shows the amount of VAT charged, the amount of VAT paid, and your VAT liability.
Cloud Co Books can manage the process from start to finish, from calculating VAT to helping you correct errors if something was missed.
What Information is Needed?
When you submit a VAT return, you’ll need details from every VAT invoice, including:
- Taxable turnover
- Sales and purchases excluding VAT
- The amount of VAT charged
- Any reclaimable VAT
- Banking details for payments or refunds
If a customer does not pay, you might be able to write off the invoice under certain tax laws. Cloud Co Books can guide you on when and how to make such claims.
Not sure how to work out your VAT figures? Our guide on how to calculate a VAT return explains the process step by step so you can file with confidence.
Who Needs to Submit a VAT Return?
In the UK, any business that is VAT registered is legally required to submit a VAT return to HMRC, either quarterly or annually, depending on the chosen VAT scheme. This obligation applies to:
- Businesses with a taxable turnover above the VAT threshold (currently £90,000) must register for VAT and file returns.
- Voluntarily VAT-registered businesses, even if your turnover is below the threshold, once registered, you must continue filing VAT returns.
- Sole traders, partnerships, and limited companies, as long as they are VAT registered.
- Charities and non-profit organisations if they are VAT registered.
- E-commerce sellers and service providers meeting UK VAT requirements.
A VAT return details the VAT due on sales (output VAT), the VAT paid on purchases (input VAT), and whether you owe HMRC or are eligible for a refund.
Payment Deadlines and Penalties
If you have VAT payable to HMRC, you must make your VAT payments on time. Late payments can result in a penalty of up to 100% of the VAT bill.
The date the payment was due is usually seven days after the end of an accounting period. Payments can be made via online banking, Direct Debit, or card.
Automate Your VAT Returns in Minutes with Cloud Co Books
Cloud Co Books is your trusted partner for VAT return preparation and submission. We help businesses:
- Register for VAT and choose the right accounting scheme
- Submit VAT returns quarterly or annually with complete accuracy
- Use Making Tax Digital-compliant accounting software
- Manage VAT reclaimable amounts and minimise VAT liability
- Ensure businesses will need less time to handle VAT admin
- Avoid penalties by keeping to every deadline for submitting
Whether you need help for the first time or want to outsource VAT accounting completely, Cloud Co Books provides tailored consultancy so you can focus on running your business.