📕
guide

VAT Returns

Source:
GOV.UK
  • Part 1Overview

    You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months. This period of time is known as your ‘accounting period.’

    The VAT Return records things for the accounting period like:

    • your total sales and purchases
    • the amount of VAT you owe
    • the amount of VAT you can reclaim
    • what your VAT refund from HMRC is

    You must submit a VAT Return even if you have no VAT to pay or reclaim.

    Final VAT Returns

    You have to submit a final VAT Return when you cancel your VAT registration. You can usually do this online using your VAT online account.

    HMRC will send you a paper version to complete if your registration is cancelled because you’re insolvent.

  • Part 2Fill in your return

    Complete and send your VAT Return online.

    If you need help there’s guidance on:

    Working out what you can claim

    There are different rules if your business is a charity or not-for-profit organisation.

    VAT-registered businesses can usually reclaim the VAT that they’ve paid on business purchases and expenses. The claim must be for a business activity (you have to work out the business element if it also had a personal use).

    You must keep records to support your claim and show the VAT was paid.

    Exceptions

    You can’t reclaim the VAT on:

    There are special rules for working out how to reclaim VAT for:

    Estimated figures

    Ask HMRC for permission to use estimated figures. You’ll need a good reason why you can’t give accurate figures on your VAT Return.

    If you’re allowed, you won’t be charged a penalty unless you miss the deadline or make a careless or deliberate error. You’ll normally have to give the correct figures in your next VAT Return.

    Bad debts

    You can reclaim the VAT you’ve paid HMRC but not received from a customer if it’s a ‘bad debt’ (one you’ve written off). To qualify for the relief:

    • the debt must be between 6 months and 4 years and 6 months old
    • you mustn’t have sold the debt on
    • you mustn’t have charged more than the normal price for the item

    You should reclaim them via your VAT Return (add them to your Box 4 figure) and keep records about the debt.

    If the debt is paid, you must pay the relief back via your VAT Return by adding the amount to your ‘Box 1’ figure.

  • Part 3How to submit your return

    You must submit your return online unless:

    • your business is subject to an insolvency procedure - if you have a Company Voluntary Arrangement or an Individual Voluntary Arrangement you can submit your return online if you want to
    • HM Revenue and Customs (HMRC) is satisfied that your business is run by practising members of a religious society with beliefs that don’t allow you to use computers

    You need a VAT number and a VAT online account (sometimes known as a ‘Government Gateway account’). You can then submit the VAT Return using HMRC’s free online service or commercial software.

    Getting online

    If you need:

    HMRC’s free online service

    Log in to your VAT online account and complete the VAT Return.

    Software you can buy

    HMRC has a list of software you can buy to submit your VAT Return.

    Keep any reference number you receive as proof you’ve sent your return.

    Using accountants or agents

    You’ll need to authorise them before they can submit your VAT Return. You can do this through your VAT online account.

    Help with online services

    Contact the VAT Online Services Helpdesk if you need any help using VAT online services.

  • Part 4Deadlines

    Check your VAT Return and payment deadlines in your VAT online account.

    Your VAT online account tells you:

    • when your VAT Returns are due
    • when the payment must clear HM Revenue and Customs’ (HMRC) account

    The deadline for submitting the return online and paying HMRC are usually the same - 1 calendar month and 7 days after the end of an accounting period. You need to allow time for the payment to reach HMRC’s account.

    Sign up to get email reminders when your VAT Returns are due - log in to your online account and go to ‘Your contact details’ in the ‘Update personal details’ section.

    Exceptions

    The deadlines are different if, for example, you use the VAT Annual Accounting Scheme.

    Pay your VAT bill

    You must pay VAT to HMRC electronically, eg through direct debit or internet banking. Most businesses aren’t allowed to pay by cheque.

    Contact HMRC if you can’t pay your VAT bill.

  • Part 5Surcharges and penalties

    A late VAT Return or payment is known as a ‘default’.

    Surcharges

    You may enter a ‘surcharge period’ if you default. Defaulting during a surcharge period means:

    • the surcharge period is extended
    • you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you pay late

    HM Revenue and Customs (HMRC) will write explaining any surcharges and what happens if you default again.

    How much you pay

    Surcharges are a percentage of the tax paid late. HMRC estimate this if they don’t have your return - this is known as an ‘assessment’.

    Default Surcharge if turnover is less than £150,000 Surcharge if turnover is £150,000 or more
    1st No surcharge but if you default within 12 months you enter a surcharge period No surcharge but you enter a surcharge period
    2nd No surcharge but you enter a surcharge period 2% (or no surcharge if it’s less than £400)
    3rd 2% (or no surcharge if it’s less than £400) 5% (or no surcharge if it’s less than £400)
    4th 5% (or no surcharge if it’s less than £400) 10% or £30 (whichever is more)
    5th 10% or £30 (whichever is more) 15% or £30 (whichever is more)
    6 or more 15% or £30 (whichever is more) 15% or £30 (whichever is more)

    Exceptions

    There’s no surcharge if you submit a late VAT Return and you have no tax to pay or you’re due a VAT repayment.

    Penalties for incorrect VAT Returns

    HMRC can charge you a penalty (between 15% and 100% of the unpaid amount owed) if your VAT Return is inaccurate.

    Penalties for submitting a paper return

    You can be charged a penalty of up to £400 if you submit a paper VAT Return, unless HMRC have told you you’re exempt.

  • Part 6Assessments

    If you don’t send your VAT Return and pay any VAT due on time, you will get a ‘VAT notice of assessment of tax’ from HM Revenue and Customs (HMRC), telling you how much VAT they think you owe.

    What you need to do

    Send your VAT Return and any payment due immediately.

    If the assessed amount of VAT is too low you must tell HMRC within 30 days. Do this by sending a correct VAT Return and VAT payment or contacting them. You may be charged a penalty if you don’t.

    If the assessment is too high, you can’t appeal it. You must send a correct VAT Return and VAT payment.

    Contact HMRC if you can’t pay your tax bill and contact the VAT helpline if you can’t send the return.

  • Part 7Interest on underpaid or overpaid VAT

    HM Revenue and Customs (HMRC) may charge you interest if you don’t report and pay the right amount of VAT. If you pay too much VAT because HMRC make a mistake, you can claim interest.

    When interest is charged

    Interest may be charged if you:

    • report less VAT than you charge, or reclaim more than you pay
    • pay an assessment that HMRC later find was too low
    • let HMRC know you owe them VAT because of a mistake on your VAT Return

    How much interest is charged

    Use your VAT online account to check the interest you owe.

    HMRC will also send you a notice telling you how much you owe and how it’s worked out.

    If you don’t pay within 30 days, further interest is charged on the VAT due from the date of the notice. You’ll be charged interest for as long as you don’t pay, up to a maximum of 2 years.

    You can’t deduct the interest HMRC charges you when working out your taxable profits.

    Claiming interest

    You may be able to claim interest if HMRC’s mistake means:

    • you pay too much VAT
    • you reclaim too little VAT
    • a payment to you from HMRC was delayed

    Normally HMRC won’t repay interest if you’ve paid too much VAT because of a mistake you made.

    How much interest can you claim

    Normally interest is paid for the whole period from when the VAT was overpaid or reclaimed until the date repayment is authorised. If you caused a delay to any payments (eg by not claiming straight away) HMRC might leave this time out.

    You have to claim the interest separately from the repayment itself.

    Write to HMRC with details of the repayment, explaining why you’re owed interest. You must do this within 4 years of the repayment’s authorisation date. Use the postal address on the VAT correspondence you have from HMRC.

    Any interest you get from HMRC counts as taxable income.

    Paying interest to your customers

    You must pay any of the interest you get (as well as the VAT) to your customers if HMRC’s mistake means they paid too much VAT.

    Contact the person at HMRC who dealt with your claim if you need to find out how the interest was calculated. This can help you work out how much you need to repay each customer. If you can’t get in touch with a customer to repay them, you must give the money back to HMRC within 14 days.

    Interest rates

    HMRC only charge or pay simple interest (interest on the original amount, not interest on interest).

    Challenging an HMRC decision

    You can’t appeal the decision to charge you interest but you can challenge the actual amount.

Part 1 Overview
Part 2 Fill in your return
Part 3 How to submit your return
Part 4 Deadlines
Part 5 Surcharges and penalties
Part 6 Assessments
Part 7 Interest on underpaid or overpaid VAT
govuk

Last updated: 27 August 2014