Once you reach a certain threshold (£85,000 until at least 2020), you have to register for Value Added Tax and start filing VAT returns to either pay VAT or receive a refund. So, here's the lowdown on when and how you file a VAT return.
What is a VAT return?
A VAT return is like a mini tax return, which you submit to calculate how much VAT you have charged and owe to HMRC, and how much VAT you have paid on business expenses.
When do I need to file my VAT return?
VAT returns are usually submitted every three months (when you register for VAT you can pick which months you want to be at the end of each period if you have a preference), or in some cases, monthly or annually.
You need to submit your VAT return and pay any VAT you owe within one calendar month and seven days from the end of each period.
How to complete your VAT return
Log in to your HMRC account and you should see the option to file your VAT return. Click the button and select the period you're completing your return for.
When you've done this, you should see the page below. So let's talk through each section and how to fill 'em in.
It's pretty straightforward, but it's helpful to see the page before filling it in and debunk anything that might be unclear at first.
Enter the amount VAT you've charged on your sales, which you will need to pay to HMRC
Most people can put 0 for this one.
But if you have "acquired" (bought) anything for your business from any European Community Member States and haven't paid VAT on it yet, you need to enter that amount here.
The page will automatically add Box 1 and 2 together to calculate how much VAT you need to pay to HMRC. Magic!
Enter the amount of VAT you have paid on any purchases you've made for the business. Keep in mind that as with your main tax return, not all expenses are allowable.
The difference between boxes 3 and 4 will be calculated to work out how much VAT you need to pay to HMRC or if you're due a refund (yay!) how much it will be.
Enter the total value of the sales you've made in the VAT period, minus VAT charged (AKA the net amount) in this box. This includes any sales to EC Member States.
Enter the total net value of the purchases you've made in the period in this box. This includes any purchases from EC Member States.
Enter the total net value of the sales you've made to EC Member States during the period.
Enter the total net value of purchases you've made from EC Member States during the period.
So now you can either save your return as a draft, if you need to check some info or want to have someone else check it, or you can click "Next" to continue.
The next page will show your amounts so you can check them, then you'll click "Next" and be asked to log in again.
Hit "Submit" and download and save the PDF version of your VAT return in an appropriate place when given the option.
Then, you can pay the VAT you owe, or if you're due a refund this will either be paid into your bank shortly or you'll receive a cheque.
HMRC do sometimes ask to see your VAT records, including your bookkeeping and receipts, especially if it's your first return or you're reclaiming a large amount of VAT, so make sure you have easy access to these, just in case.
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