What is VAT Returns? How to Calculate It?

A form that you file with HMRC, often four times a year is known as VAT Return. It basically shows how much VAT is due for you to pay them. By not registering with VAT, you won’t be able to file VAT returns.

The VAT return = the amount calculation of VAT due on the sales-the amount of reclaimable VAT on purchases.

Finally, the VAT return you will obtain will then be payable to HMRC.


When does a business have to register for VAT?

If your annual turnover goes beyond the threshold of current VAT then you will be required to register with HMRC for VAT. So, complete and submit the VAT returns to HMRC, often quarterly.

Flat Rate VAT

VAT Returns denote a burden of administrative work for large business owners as compared to the small businesses having an annual turnover of £150,000 or less (current figures, may be subject to change) the Flat Rate Scheme may be the best alternative.

A business has to pay a fixed, flat-rate percentage of gross turnover under the Flat Rate scheme in order to ascertain how much VAT need to be paid by HMRC quarterly.

However, there will be a normal VAT charge on all of the ‘supplies’ a small business make, and issue VAT receipts to customers in the normal way, the quarterly VAT return should be more direct because it needs the business for calculating calculate its total sales and thereafter a flat rate of VAT gets applied to the VAT-inclusive value.

The rate that businesses employ to ascertain their VAT rate under the Flat Rate Scheme will differ based on the products and services the business provides.

How do businesses register for Flat VAT rate scheme?

For applying the Flat Rate Scheme a business must fulfill a number of eligibility criteria:

  • It should be a VAT-registered business (either due to its turnover goes beyond the current £83,000 VAT registration threshold or due to consideration of voluntary registration).
  • The annual turnover of the business should be £150,000 or less.
  • The business should sell products or services that come under ‘taxable supplies’ i.e not exempted from the VAT.
  • The business should not have left the Flat Rate Scheme during the previous 12 months.
  • The business should not come in a margin or capital goods VAT scheme.
  • The business should not be ‘closely linked’ with another company.


How to file VAT Returns?

You are required to have a VAT number and a VAT online account. By using HMRC’s free online service or commercial accounting software, you can easily submit your VAT Return.


You are required to have:

  • A VAT number and online account for registering VAT
  • Sign up for an online account through HMRC website and select ‘VAT submit returns’
  • Log in to your online account and submit your VAT returns

You can also take the help of an accounting software for submitting your VAT return directly to HMRC. This means you don’t need to enter your figures individually in HMRC’s online service.

You can also find one of the best accountants in London for doing HMRC filing for you.

VAT Inspections

VAT officers can visit your business to supervise your VAT records and ensure that you are paying and reclaiming the right VAT amount. HMRC normally contact you for arranging a visit.

HMRC provide you 7 days’ notice. They will confirm what kind of information they wish to see, how long it possibly take and if they wish to inspect your premises. You can also ask them delaying your visit.

HMRC can also visit you without an appointment. They can make a phone call to you regarding VAT.

After the Visit, HMRC will confirm you in writing:

  • What should be done to improve your VAT recordkeeping
  • Any changes you need to make your VAT account.
  • If you’re overpaying or underpaying your amount of VAT
  • any penalty you need to pay

VAT Registration

You need to provide details to HMRC like :

  • Description of your company’s main business activity
  • Date you begin with/expected to start trading
  • Name and VAT Numbers (if applicable) of all the businesses where you or other directors of the company are owners / Partners or Directors
  • Anticipated turnover for the next 12 months
  • Trading address of the business (not the registered office)
  • Director’s Full Name
  • Director’s NI number
  • Director’s Date of Birth

Director’s Current Home address and also previous address if the director has resided at the existing home address for less than 3 years.

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