What is a VAT return?

What is on a VAT return?

Nine boxes. The ones that matter for most small businesses are output VAT on sales, input VAT on purchases, the difference between them, and the net value of sales and purchases for the period. The remaining boxes deal with goods moving to and from Northern Ireland and the EU, and are zero for most domestic businesses.

The return covers a VAT period, normally a quarter, and is due one calendar month and seven days after the period ends. Payment is due the same day; for most businesses that means a direct debit collected a few days later. Monthly returns are available for businesses that are usually in a refund position, and an annual scheme exists for small ones.

Since Making Tax Digital, the return is filed from software that holds the underlying records, not typed into a web form. The figures must flow digitally from the bookkeeping to the boxes, which is the part that rules out a spreadsheet and manual copying.

A worked example

The electrician's quarter from the VAT entry, box by box. He sold £30,000 net and bought £12,000 net, all standard-rated, all within the UK.

What goes wrong on VAT returns?

• —Reclaiming input VAT without a valid VAT invoice, or on a supplier who turns out not to be registered.
• —Missing a purchase from the period and reclaiming it a quarter late, which is allowed but muddles the reconciliation.
• —Treating the VAT owed as spare cash between quarters, so the return is right and the payment bounces.
• —Filing from figures that were adjusted after the bank reconciliation, so the return and the ledger disagree.