How do I file a VAT Return online?

What is a VAT Return?

Let’s get the basics out of the way first. Value Added Tax (VAT) is applied to the price of certain goods, services and other taxable supplies. The standard VAT rate is 20% for most goods and services, while some select items are charged at either 5% or even zero rated (0%).

As mentioned above, most businesses have to submit an online VAT Return to His Majesty’s Revenue and Customs (HMRC) every three months. This is a summary of your income and expenses as well as the VAT you need to pay or reclaim for this period. So, on your VAT Return you will see:

• Your total sales and purchases for the three-month period
• The amount of VAT you owe
• The amount of VAT you can reclaim for purchases made by your business

To submit a VAT Return, you first need to register with HMRC on the UK government website. Things have changed a bit recently and before you register with HMRC, you will need to create a Government Gateway user ID. If you are a business or organisation, you will also now need a device or authenticator app to be able to login. Once you have your Government Gateway user ID and your VAT number, you can begin the process of filing your VAT Return online.

The Making Tax Digital initiative

HMRC has made a gigantic push to bring everyone online to simplify and improve processes. This whole system is known as Making Tax Digital (MTD) for VAT. Since April 2019, all VAT-registered businesses with a taxable turnover above the current VAT registration threshold (£90,000) have been required to submit their VAT returns using MTD-compatible software – and since April 2022, this applies to every VAT-registered business, even those below the threshold. A huge change that impacted more than one million businesses and changed the way they keep and file their VAT records.

Once a business has registered for MTD, they will no longer be able to directly use their online account to file their VAT Return. Instead, they will have to use accounting software that is compatible with MTD. The positive around this is it makes things much easier to keep and submit records, whether that’s through an app or even by submitting your VAT return directly from any Excel spreadsheet.

Something to note, once you have registered for MTD, you still need to keep digital records and submit your VAT Return through MTD-compatible software even if your taxable turnover is below the VAT registration threshold. You must de-register from VAT or be exempt from MTD to not be required to file a return.

Completing a VAT Return online

If you’re not uploading your spreadsheets directly and still need to complete a VAT Return, there will be several parts of the online form that you need to complete. These are as below. These are the boxes of the VAT Return that you will be asked to complete when you submit your VAT Return online:

Box 1

The VAT due this period from sales and other outputs.

Box 2

The VAT due in this period from acquisitions of goods made in Northern Ireland from European Union Member States.

Box 3

The total VAT due as a sum of Box 1 and Box 2

Box 4

The VAT reclaimed in this period on purchases and other inputs (including acquisitions from the EU.

Box 5

The net VAT to pay HMRC or reclaim – this will be calculated automatically when filling out a VAT Return online.

Box 6

The total value of sales and any other outputs, excluding any VAT.

Box 7

The total value of purchases and all other inputs excluding any VAT.

Box 8

Brexit has affected this box, so it is for either of the following amounts: 1. All supplies of goods and related costs, excluding any VAT, to EU Member States made on or before 31 December 2020, 2. For supplies of goods and related costs, excluding any VAT, from Northern Ireland to EU Member States made from 1 January 2021.

Box 9

As with Box 8, this is for either: 1. For acquisitions of goods and related costs, excluding any VAT, from EU Member States made on or before 31 December 2020. 2. For acquisitions of goods and related costs, excluding any VAT, from EU Member States to Northern Ireland made from 1st January 2021.

The above can be altered if you use any of the special VAT accounting schemes, such as a Flat Rate VAT Scheme. You can see how this changes the specific items on the UK government website.

I submitted a late VAT Return, what happens now?

Missed your VAT return deadline? From 1 January 2023, HMRC switched to a points-based system – think of it a bit like penalty points on a driving licence.

Each late filing earns you 1 penalty point. Once you hit the threshold for your filing frequency (4 points for quarterly filers), HMRC issues a £200 fine – and another £200 for every late return after that until you clear the points. Points drop off after 2 years of filing on time.

On top of that, late payment now carries its own charges: HMRC starts adding interest from day 1 after the deadline, with a first penalty of 2% of the unpaid VAT after 15 days and an additional 2% at 30 days.

One more thing to note, you can also be penalised for:

• Careless or deliberate mistakes on your VAT Return
• Not telling HMRC their calculation is wrong within 30 days
• If you submit a paper VAT Return an exemption from online filing

ANNA makes filing a VAT Return as easy as can be. Our collection of Making Tax Digital (MTD) spreadsheet templates for calculating and submitting via our VAT bridging tool makes it super easy for everyone. If you have any questions, we’re here 24/7. Just email hello@anna.money and we’ll be in touch shortly.