Accounts & Bookkeeping

VAT Made Easy: Filling in Your Return and Making Payments on Time

Businesses who earn more than £85,000 per annum have to be VAT (Value Added Tax) registered. When you register for VAT, whether you’ve reached the threshold and have to pay it – or have voluntarily registered, there comes a number of responsibilities, paperwork, and important dates to make note of.

As part of your VAT responsibilities, your business must:

  • Charge the correct amount of VAT in all appropriate places
  • Keep VAT Records and a VAT account
  • Submit regular VAT Returns
  • Pay any VAT due to HMRC within specified timeframes

For the last few years, HMRC has been rolling out a program called ‘Making Tax Digital’ (MTD), and MTD for VAT is one of the areas where registration and record keeping must be done digitally, which means using ‘compatible software’ that works with MTD, as you won’t be able to use your online account to send a VAT Return to HMRC.

What is a VAT Return, and How Often Do You Need to Fill it in?

Each VAT ‘accounting period’ runs for 12 months, and the return is due once a year (within 2 months of the end of your accounting period), but you are required to make advance payments (payments on account) towards the VAT bill on a regular basis – for most this will be quarterly (every 3 months), but for some it may be monthly – and if it’s the case of a final payment (after deregistering from VAT) it will need to be done within 2 months after the final (12th) month.

It’s vital that you get your return submitted in time to avoid penalties and potential fees being levied against your account.
The sanctions for late submissions have recently undergone changes to “make them fairer and more consistent across taxes” and will see the introduction of a point-based penalty system which will apply to VAT customers from 1 January 2023.

Late filing isn’t the only concern involved with submitting a VAT Return, HMRC can also charge penalties of:

  • 100% of any tax under-stated or over-claimed due to carelessness or deliberate inaccuracy
  • 30% of an assessment if their figure is too low and you do not correct them within 30 days
  • £400 for submitting a paper return when you’re not exempt from using the VAT Online Account or an appropriate MTD software

When you complete your VAT return you need to have keep clear and understandable records which cover:

  • Total sales
  • Total purchases
  • VAT owed
  • VAT to be reclaimed
  • What the amount of VAT refund from HMRC is

Even if you have no VAT to pay or reclaim, if you’re VAT registered then you must submit a VAT return.

Paying VAT That’s Due – How and When Should You Do This?

Payment is due within one month and seven days from the end of your accounting period. As this period will vary from business to business, it’s important to check your VAT online account, where you can find out what your due dates are.

It’s important to make sure you’ve made the payment within the deadline to avoid any penalties or potentially negative repercussions from HMRC.

3 Best Practice Tips to Make Preparing Your VAT Return Easier

In order to make the VAT process simple, you should:

  1. Keep Clear Accounts
    By regularly updating your accounts, making sure all the information is sorted into appropriate areas (such as sales, VAT owed, VAT to be reclaimed, etc), and using software that is compatible with MTD, you can save yourself a lot of time and effort when your payments and return are due.

  2. Know What You Can Claim
    When you’re making your VAT claim, you need to know what is eligible and what isn’t. For input VAT you could potentially claim for:
    – Goods and Services purchased / imported which are taxable and for business use (such as stationary, tools, or stock)
    – Goods and services which are sold outside the UK, but would be taxable if they were made in the UK
    – Unpaid customer debts
    But you would not be able to claim for:
    – Goods and services for non-business usage
    – Goods and services used to create VAT-exempt supplies
    – Business entertainment
    – Businesses costs that have not been received / purchased
    – Foreign VAT or UK VAT which has been incorrectly charged

  3. Make Sure You’re Using the Correct Method
    If you’ve not been specifically told by HMRC that you can or should submit a paper return, then you must use the digital / online services. For businesses who have voluntarily registered for VAT and are under the £85,000 threshold – then using the VAT Online Account is allowed; but for anyone over the threshold, using MTD compatible software is required.

Working out what you’ve got to pay, when you’ve got to pay it, and ensuring that you’re claiming the right amounts for everything you’re due isn’t always an easy task – but keeping your records and accounts up to date can help ease this burden.

Contact our advisors today to discover how we can help you manage your VAT responsibilities and ensure that you’re staying compliant.

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