Filing your VAT return to HM revenue and customs (HMRC) is a straightforward process. Usually, VAT returns are filed every three months. This is known as your ‘accounting period.’
During this accounting period, the following things need to be recorded:
- Total sales and purchases
- Amount of VAT you owe
- Amount of VAT you reclaim
It is necessary to submit VAT even if your business has no VAT to pay or reclaim.
Fill in your return
By signing into your HM revenue and customs (HMRC) account, you have to submit your VAT return.
If you have signed up for ‘Making Tax digital for VAT, you cannot file your returns using the online HMRC procedure. You will file through your bookkeeping app.
What you can reclaim
If you are a VAT-registered business, you might be able to reclaim VAT paid on business expenses and purchases. However, you must provide proof for your claim.
There are two exceptions on which VAT cannot be reclaimed:
- Entertainment purposes
- Purchases on the VAT Flat Rate Scheme
Using estimated figures
If, for some reason, you cannot provide accurate figures you can ask HM revenue and customs (HMRC) permission to use estimated figures for sales and purchases.
Providing a valid reason will waive you off a penalty assuming you submit the form before the deadline and do not make an error in submitting.
Instances where you cannot fil VAT online
It is mandatory to file VAT online unless:
- Religious reasons prevent you from using a computer
- You lack internet access due to your age, a disability, or an area without access
- Business is undergoing an insolvency procedure
To submit your VAT online, all you need is an online account with a VAT number. Find it here:
The process can be divided into two steps:
- Create an online VAT account and choose “VAT submit returns”.
- Login into your account and apply for a VAT number.
Using accounting software:
Most accounting software allow you to submit VAT directly to HMRC. Since they record your financial data, the forms are automatically filled. It completes the entire process with drastic ease compared to creating an account on HMRC. Accounting softwares support filing tax with HMRC.
It is helpful to save the reference number received as proof that you submitted your VAT.
The deadlines to file VAT can be found on your account.
You can incur surcharges (owing extra money including your VAT) due to the following reasons:
- Failure to submit VAT before deadline
- Entire payment not received before deadline
What is the cash accounting scheme?
A business must pay to HMRC the difference between the VAT on their sales invoices and the VAT on invoices they have received. This is regardless as to whether or not the business has actually received or paid the money.
Under the cash accounting scheme, businesses pay to HMRC the VAT collected on payments received from customers, rather than the amount of VAT invoiced. Input VAT is claimed on goods and services used, once payment has been made for them. Businesses are eligible to use the cash accounting scheme if their taxable turnover is less than £1.35 million per year.
Benefits of filing VAT Return Online
Never miss a deadline
Using an accounting software you are notified prior to the tax return deadline. Even more so, all the tax data is collected for you. All you have to do is login to the right place.
Reduce chances of errors
You have a lot less to worry about when a software takes care of the filing process. The occasional tendency to err as a human being is not to be concerned about.
Make instant changes
If by any chance you do make a mistake, you can instantly rectify it within the software. This would also reduce chances of getting fined for the filing error.
Registering for VAT online gives your business a VAT registration number. Displaying this number on documents, stationary, and business cards will boast your professional image.
Clients will become more wary of making payments on time and investors will be a little less apprehensive in funding your projects.
Shifting to a digital medium of taxation offers widespread benefits. In the past, you might have the freedom to decide whether to make the shift, but this is no longer the case. From April, 2020 all businesses are required to file VAT online through HM customs and revenue.
Change can always seem daunting at first. It instills a contradiction in our inner mental world glued together by rigidly formed habits. Resolving this contradiction naturally evokes an unpleasant state of dissonance.
The problem arises when we confuse this dissonance for our mental incapability to change. The truth is this dissonance is a mere trick to sustain the mind’s aversion to change.