This article is here to guide you to understanding the VAT process – ranging from the return, submission dates and deadlines, the VAT refund rules and ways on how to check and correct for any VAT return errors should they arise. To begin with, we’re going to start with the basics like understanding what a VAT return means, what is involved and where it applies.
- What is a VAT Return?
- Filling and Submitting Your VAT Returns
- When to File the VAT Return
- What’s Online VAT Return?
- Correcting Errors on VAT returns
What is a VAT Return?
It usually comes as a value-added tax form, where the subject party is required to file a tax form with details on the amount of VAT (value added tax) they are supposed to pay. In the form, there are details featuring the total sales you made during that period, the VAT amount you owe together with the total amount you’re looking to reclaim and your VAT refund. Of note, the VAT refund is a must do requirement even if you won’t be having any VAT to reclaim or pay. The result is the total amount payable to HMRC. If for some reason, the reclaimed amount is in excess of the sales amount that is to be paid, then in such a circumstance, HMRC will pay you back.
Filling and Submitting Your VAT Returns
The VAT return calculates the total amount of VAT due on sales commonly referred to as output VAT. From this, you deduct the total reclaimable amount based on your purchases (input VAT). The result you find is the amount you ought to pay the HMRC. There are situations where you see the input VAT being higher than the output VAT; the business will be subject to a due refund which will be done by the HMRC itself. Your role as the business owner is to inform the HMRC when the VAT is due to be refunded by submitting a VAT return form. This covers a three month period, and the dates will be included.
VAT refund rules in the UK are at times complicated depending on your purchase orders. To get a more clear detail on what’s required, read the government’s full VAT guide. But to touch on a few key aspects, you need to be looking out for before making a VAT submission:
- The VAT rates are different; we have a zero rate (0%), reduced (5%) and the standard (20%).
- Another thing to note, reclaiming your VAT on the purchases made is not always a guarantee; for instance, customer entertainment, house purchase or other non-business uses. Keep records to help with validating all claims related to business related.
- Be on the lookout for penalties, not forgetting the undeclared errors which are 15%.
There are VAT rules put in place to help clients with reclaiming their VAT; for instance:
- Automobiles; repair, purchasing, and even maintenance costs
- Staff or employees travel costs; accommodation and transportation expenses
- Other business that could be partially exempted from VAT return
Estimation of Figures
Here, you ought to seek permission from the HM Revenue and Customs to be in a position to come up with estimates. For you to be granted permission, you ought to have a tangible and credible reason why you cannot be in a position to submit the VAT return with inaccurate figures. If by chance, you’re exempted or given permission, you’ll be exempted from some of the VAT return penalties not unless you make an offense of missing the set deadlines or file VAT return with careless or deliberate errors.
When it comes to the VAT refund, one should be able to reclaim the amount they paid the HM Revenue and Customs but not received a customer in the case where it’s an unfulfilled debt, a bad debt that you’ve written off. For this to be effective;
- The debt ought to be between a period of six and fifty-four months
- The debt must be of the normal and not more
- The debt ought to have been sold on
This is claimed through the file VAT return and records of the debt kept for accountability. In situations where the debt gets paid, ensure you pay back the relief amount through your VAT return. Use the “BOX 1” to add the amount.
When to File the VAT Return
This is usually done at the end of the accounting period, generally after every three-month cycle. Based on this, you ought to file four VAT returns per year not failing to include the starting and ending dates on each return. Better still, you could check your online account, and it will inform you on your VAT return dates and when HMRC’s account should be clear of your payments. The set dates are most times the same; therefore, you ought to come up with a good working plan for the process. Deadlines are the 1st calendar month and seven days past the end of the accounting period. Of note, payments are usually made electronically via internet banking or debit. Cheques are restricted to some businesses and therefore not fit for all.
What’s Online VAT Return?
The name speaks for itself; you go to a website where you get to file your VAT return. It is the most preferred and most natural way. All you need is to ensure you have a VAT number and a Government Gateway account then you’re free to log in. You’ll be issued with these prerequisites the moment you make a self-employed registration.
Correcting Errors on VAT returns
Errors done on previous VAT returns can be corrected but they ought to have met certain conditions;
- They have to be 10,000 Euros or less
- 10,000 to 50,000 Euros (less than 1% of your quarterly turnover)
Net errors are usually the difference between the total mistakes made in output and those of input VAT.
If you’ve been having problems with filing your VAT return, we’re hoping that is article will be of great benefit to you. Have you filed a VAT return before? What’s the quickest way of claiming VAT back? Share some insights with us.