How do I do a VAT Return?

A value-added tax (VAT) return, calculates how much VAT a company is due to pay, or expects to receive from HMRC. VAT returns are typically submitted quarterly and each quarter is known as your ‘accounting period’. The following are what the VAT return records in an accounting period:

  • Total sales and purchases
  • The amount of VAT you owe
  • The amount of VAT you can reclaim
  • If applicable – what your VAT refund from HMRC is 

You have to submit a VAT return even if you have no VAT to pay or reclaim, as it shows you are still trading and complying with the ‘rules’ of being VAT-registered.

VAT claims need to be valid and supported by VAT documentation

This means that for every sale or purchase, you need to provide paperwork, such as an invoice or receipt, that outlines the VAT element in the price breakdown. This is often referred to as a VAT invoice. 

HMRC do routine inspections, they also investigate VAT reclaims, especially if they are for large amounts of money. This is why it is crucial that paperwork supports every VAT-able transaction. If your suppliers are VAT-registered, they will break down the VAT element and at what % rate on their invoices or receipts. 

For example, if you purchase materials for £100 and the rate of VAT charged is 20%, the VAT element of the £100 will be £20.

It is worked out using this equation: £100 x 20(%) ÷ 100 = £20. 

Every VAT-registered business is required to submit their VAT return online using MTD compatible software

It became mandatory for VAT-registered businesses to submit their VAT return online, using Making Tax Digital (MTD) compatible software on 1 April 2019. 

One of the many reasons we use Xero is because it is compatible with MTD. For more information about this, check out our web page that is entirely dedicated to MTD with Fresh Financials and Xero: https://www.freshfinancials.com/making-tax-digital/

Xero, creates your VAT return using the accounting period date ranges provided from HMRC and the VAT scheme information in your financial settings.

The VAT return will report on the current period, but it will also include transactions from earlier periods if they are added during the current period and are for a period where the VAT return has been filed.

If we are submitting your VAT return on your behalf, we do all the work for you

All you need to do is to send us the paperwork for every transaction that you make. We will contact you in good time for any outstanding items that we still need the paperwork for. 

Once we have checked that everything is accounted for and is correct, and you have checked it is correct too, we will submit your VAT return to HMRC via Xero. 

This will update Xero and show that your VAT return has been filed. We then let you know how much to pay. Or, if you have set up a direct debit with HMRC for your VAT payments, the amount will be taken from your bank account automatically.

There are penalties if your VAT return is submitted late

The penalty amount will vary depending on the value of the VAT return and if you are a repeat offender.

Don’t struggle with VAT returns alone

Here at Fresh Financials, we deliver daily bookkeeping to all of our clients as we believe it is an integral part of your business. Daily bookkeeping allows us to keep on top of your finances at the same pace as you conduct your business.

Daily reconciliations means that by the time that your next VAT return rolls around, you won’t have a backlog of paperwork to delve through, nor will you be in a panic searching for misplaced receipts and invoices. You will be up to date and the submission of your VAT return will be on time and stress free. Read one of our earlier blogs which offers more information on why we believe daily bookkeeping is so important.

Get in touch with us today if you would like to find out how we can help you and your business stay on top of your finances and assist with your VAT returns.