A Guide on How to Complete a Vat Return

As a business owner in the UK, you are expected to pay HMRC (HM Revenue and Customs) the difference between your VAT input and output. VAT (Value Added Tax) is a fee that you charge on top of the selling price. This is output VAT.

But the taxes that you pay as a business for goods and services is input VAT. These are the taxes you may be able to claim as a business owner. In the event that your input VAT is greater than your output VAT, HMRC will issue you a VAT refund.

Many business owners find seeking a VAT return to be confusing, so this guide serves to clear up things and to make submitting easier.

Here’s What We’ll Cover:

Is It Difficult to Complete a VAT Return?

Completing a VAT Return

Submitting Your VAT Return

Key Takeaways

Is It Difficult to Complete a VAT Return?

Depending on the complexity of your business, completing a VAT return may be simple or difficult. It’s important to remember that there are various rules and regulations concerning VAT.

For example, VAT rates are not universal and thus can be charged differently among goods. What’s more, you might not always be able to claim input tax. And if you make errors in returns, you could incur steep penalties.

Moreover, some businesses might have a special scheme, such as flat rate or cash accounting. Do you operate under the special scheme of cash accounting? Your VAT payments to HMRC are based on payments from business customers rather than the VAT amount on the invoice. 

Completing a VAT Return

There are nine VAT return boxes that require your attention. Let’s examine each box one at a time to ensure proper completion.

Box 1

Since VAT returns are for periods of three months, Box 1 is where you fill in the amount due based on the current three-month accounting period. Furthermore, the VAT amount gets based on your sales and other applicable outputs during that period on sales.

Box 2

You are only required to fill in Box 2 if you purchased goods and services from other European Community (EC) countries. Moreover, the figure you enter comes from business purchases and not sales of intra-EU acquisitions. Enter your period on purchases here. 

Box 3

This box designates the total VAT amount due and calculates automatically upon completion of the return.

Box 4

Any VAT that you reclaimed on services or goods needs to be entered here. This includes purchases from the EC that you entered in Box 2.

Box 5

This box is for the net VAT amount. This figure is either what you will pay HMRC or what HMRC refunds you. This figure automatically calculates the difference between Box 3 and Box 4. And it does so upon completion of the return.

Box 6

Excluding VAT, Box 6 designates the total sum of your net sales. Please note that you will also need to exclude pence. You can determine this figure by subtracting your total sales from VAT.

Box 7

Excluding VAT, Box 7 designates the total sum of your net purchases. Also included in this total is expenses for the given VAT accounting period. Once again, you will need to exclude pence.

Box 8

This is for the total sum of your net purchases and is for goods only that you sold to EC states. You will need to exclude both VAT and pence from your total. Box 8 will typically be £0.

Box 9

This is for the total sum of your net purchases of goods bought from EC states. You will need to exclude both VAT and pence from your total. Box 9 will typically be £0.

Submitting Your VAT Return

Upon completion, you will need to submit an online return to HMRC. If you owe VAT to HMRC, you must make all payments electronically. The due date is typically a month and seven days following the end of a tax period.

Key Takeaways

If you struggle with how to complete a VAT return, consider FreshBooks. Its user-friendly double-entry accounting tools make financial reporting easy. If you operate under a special scheme, FreshBooks makes monthly VAT returns even easier. You can also find helpful VAT guides via the UK government’s official website.

And over on our Resource Hub, we have many beneficial articles and insights designed to assist small business owners in the UK. From tax deadline dates to starting your own business, there is a wealth of resources awaiting you.

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