What to include in a VAT Return

You’ll need to include: your total sales and purchases the amount of VAT you owe the amount of VAT you can reclaim the amount of VAT you’re owed from HM Revenue and Customs ( HMRC ) (if you’re reclaiming VAT on business expenses) You must include the VAT on the full value of what you sell, even if you: receive goods or services instead of money - for example if you take something in part-exchange have not charged any VAT to the customer - whatever price you charge is treated as including VAT Read the guidance on completing your VAT Return . If you’re registered for VAT in Northern Ireland, you must include EU sales on your VAT Return and complete an EC Sales List . HMRC can charge you a penalty of up to 100% of any tax under-stated or over-claimed if you send an inaccurate return. Accounting for import VAT You can account for import VAT on your VAT Return by using ‘postponed VAT accounting’ . This allows you to declare import VAT and reclaim it as a business expense on the same VAT Return. Using estimated figures Ask HMRC for permission to use estimated figures. You’ll need a good reason why you cannot give accurate figures on your VAT Return. If you’re allowed, you will not 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. Claiming relief on bad debts If a customer does not pay you for goods or services, you can write off the invoice as a ‘bad debt’. If you’re in this situation, you might be able to claim relief from VAT . To qualify for the relief: the debt must be older than 6 months you must submit your claim within 4 years and 6 months of the date the payment was due or the date of supply (whichever was later) you must not have sold the debt on you must not have charged more than the normal price for the item You need to keep records about the debt . Submit your claim for a refund in your VAT Return.

How to send your return and pay your VAT bill

Submit your VAT Return using accounting software that’s compatible with Making Tax Digital . You can only submit your return by post or another method if you have an exemption from Making Tax Digital for VAT . When you can submit a VAT Return on paper You can only submit your return on paper if: you object to using computers on religious grounds you cannot use computers because of your age, a disability or because you do not have internet access where you live Contact HM Revenue and Customs ( HMRC ) to find out how to submit a paper return. You can get help with submitting your return and understanding VAT . HMRC can charge you a penalty of up to £400 if you submit a paper VAT Return and you’re not eligible. If your business is subject to an insolvency procedure You must submit your return on paper, unless you have either of the following: a Company Voluntary Arrangement an Individual Voluntary Arrangement If you have either arrangement, you can choose to submit your return on paper or online. Pay your VAT bill You must pay VAT to HMRC electronically, for example through Direct Debit or internet banking. Contact HMRC if you cannot pay your VAT bill.

Correct errors in your VAT Return

You can correct errors in returns for the preceding 4 years, as long as the net value of the errors is either: £10,000 or less between £10,000 and £50,000 but less than 1% of the total value of your sales For these kinds of errors, make an adjustment or correction in your next return. You must tell HM Revenue and Customs ( HMRC ) separately about net errors that are: over £50,000 over £10,000 if they exceed 1% of the total value of sales deliberate errors Check how to tell HMRC about errors in your VAT return . Calculate the net value of errors To work out the net value of the errors: add up the additional tax due to HMRC subtract the tax you’re due You must report deliberate errors separately - you cannot include them in this calculation. How to make the adjustment in your next VAT return When you submit your next return, add the net value to box 1 for tax due to HMRC , or to box 4 for tax due to you. You must: keep details about the error (for example, the date it was discovered, how it happened and the amount of VAT involved) include the value of the error in your VAT account Read more about how to correct VAT errors and make adjustments or claims . Contact the VAT General Enquiries Team if you need help making corrections.

Late returns and payment

If you miss the deadline for submitting your return , HMRC will send you a ‘ VAT notice of assessment of tax’ telling you how much VAT they think you owe. You may need to pay a surcharge or penalty for submitting your return after the deadline or paying it late. The amount you owe will be worked out differently, depending on which accounting period it’s for. You should contact HM Revenue and Customs ( HMRC ) as soon as possible if you’re having difficulty paying by the deadline. If your accounting period started on or after 1 January 2023 You’ll get separate penalties for submitting your return late and paying late. If you submit your return late For each VAT Return you send late, you’ll get a penalty point. This includes nil returns (where you have nothing to declare). Once you reach your penalty point threshold , you’ll get a £200 penalty. The threshold is set by your accounting period (if you pay monthly, quarterly or annually). You’ll get a further £200 penalty for each subsequent late submission while you’re at the threshold. You can see how many points you have in your online account . Submit future returns on time to remove penalty points from your account. If you make a late payment You could get a penalty if you pay late: on your VAT Return following an amendment to a return or correction from a VAT assessment HMRC issued when you did not submit your return from a VAT assessment HMRC issued for another reason How much you’ll be charged depends on how late you pay . The penalty amount goes up after 16 days, and then again after 31 days. You’ll be charged late payment interest from the first day your payment is overdue, until you pay in full. This also applies if you’re paying in instalments. If your accounting period started on or before 31 December 2022 HMRC will record a ‘default’ on your account if you’re late with your VAT Return or payment. Getting a default may put you in a ‘surcharge period’ of 12 months. If you get another default during the 12 month period, you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you owe. You do not pay a surcharge the first time you default. Entering a surcharge period You will enter a 12 month surcharge period if you’re late submitting your payment, and your turnover is £150,000 or more. If your turnover is under £150,000, you will enter a 12 month surcharge period if you’re late submitting your payment twice in 12 months. If you’re late submitting your return or payment in a surcharge period Your 12 month surcharge period will restart if you’re late submitting your return. If you’re late submitting your payment, your 12 month surcharge period will restart and you might need to pay a surcharge. How much you pay The surcharge is a percentage of the outstanding VAT for the period in default. It’s calculated on the due date. This table shows how much you’ll be charged if you default within a surcharge period. HMRC will write to you explaining any surcharges you owe. Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more 2nd No surcharge 2% (no surcharge if this is less than £400) 3rd 2% (no surcharge if this is less than £400) 5% (no surcharge if this is less than £400) 4th 5% (no surcharge if this is 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) There’s no penalty for a late nil return (where you have nothing to declare). If your VAT notice of assessment of tax is wrong If the assessment is too high, send a correct VAT Return and VAT payment. If the assessment is too low you need to either: tell HMRC within 30 days send a correct VAT Return and VAT payment Otherwise, you might be charged a penalty (up to 30% of the assessment). How to pay a surcharge or penalty There are several ways you can pay your VAT bill , including any surcharges and penalties.

Interest on underpaid or overpaid VAT

HM Revenue and Customs ( HMRC ) will charge you interest if you do not pay the right amount of VAT by the deadline. If HMRC owes you a repayment of VAT , you may be entitled to interest. HMRC only charges or pays simple interest (interest on the original amount, not interest on interest). There are different interest rates for tax that was underpaid or overpaid before 20 August 2024. If your accounting period started on or after 1 January 2023 If you pay too little VAT HMRC will charge you late payment interest from the first day your payment is overdue until you pay in full. This includes amounts overdue after: a VAT Return an amendment or correction of a return a VAT assessment made by HMRC a missed VAT payment on account Read more about late payment interest if you do not pay VAT or penalties on time . If you pay too much VAT You may be entitled to repayment interest on any VAT that you are owed. You do not need to submit a claim for repayment interest. If HMRC finds that you are entitled to repayment interest, you will receive it automatically. Read more about repayment interest on VAT credits or overpayments . If your accounting period started on or before 31 December 2022 If you pay too little VAT You may be charged 7.5% interest if you: report less VAT than you charge, or reclaim more than you pay pay an assessment that HMRC later finds was too low you owe HMRC VAT because of a mistake on your VAT Return Use your VAT online account to check the amount you owe. HMRC will also send you a notice telling you how much you owe and how it’s worked out. If you do not 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 do not pay, up to a maximum of 2 years. You cannot deduct the interest HMRC charges you when working out your taxable profits. If you pay too much VAT You may be able to claim 4% interest if HMRC ’s mistake means: you pay too much VAT you reclaim too little VAT a payment to you from HMRC was delayed HMRC will not usually repay interest if you’ve paid too much VAT because of a mistake you made. Interest is usually 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 (for example by not claiming straight away) HMRC might leave this time out. You need 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 date HMRC authorised the original repayment. Use the postal address on the letter you received from HMRC about your VAT . Any interest you get from HMRC counts as taxable income. Paying interest to your customers You must pay your customers any associated interest if you have reimbursement agreements with them to refund them any 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. You must give the money back to HMRC within 14 days if you cannot get in touch with a customer to repay them. Challenging an HMRC decision You cannot appeal the decision to charge you interest but you can challenge the amount of interest charged .

Sending a VAT Return

When to do a VAT Return

A VAT Return is a form you fill in to tell HM Revenue and Customs (HMRC) how much VAT you’ve charged and how much you’ve paid to other businesses.

You usually need to send a VAT Return to HMRC every 3 months. This is known as your ‘accounting period’.

If you’re registered for VAT, you must submit a VAT Return even if you have no VAT to pay or reclaim.

This guide is also available in Welsh (Cymraeg).

Deadlines

The deadline for submitting your return online is usually one calendar month and 7 days after the end of an accounting period. This is also the deadline for paying HMRC. You need to allow time for the payment to reach HMRC’s account.

Use your online account to:

find out when your VAT Returns are due
find out when the payment must clear HMRC’s account
check and appeal penalties

If you use the VAT annual accounting scheme, you can set up an email reminder each time your VAT Return is due through your online account.

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