Inside this guide, you’ll find some handy tips to help you complete your first VAT return. You’ll find out when it’s due by and how to find the numbers you need. Plus, I’ll explain how you send your completed VAT return to HMRC.
Still Unsure about VAT? Read about the basics in this guide: What is VAT and How Does it Work
Updated 29 July 2021
Table of contents
1. What is a VAT Return?
A VAT return is a form you need to fill out, normally quarterly (unless you are registered for the annual accounting scheme), to let HMRC know how much VAT you have collected from your customers and paid to your suppliers. If you have paid more than you have collected, your return will show that a VAT repayment is due and HMRC will send you a VAT refund. Here’s what a VAT return looks like:
Each return summarises your sales and purchases and VAT for a single VAT period and is made up of 9 different boxes:
Boxes 1 and 2 summarising VAT you have collected on your sales (or output tax). It will also include any VAT on sales you made with other EC member states disclosed separately.
Box 4 relates to VAT on your total purchases (or input tax) that you want to reclaim.
Box 5 is the net amount you need to pay to HMRC or reclaim from them.
Box 6 contains your total sales excluding VAT for your VAT period.
Box 7 contains your total purchases excluding VAT for your VAT period.
Box 8 the value of exports to EC countries
Box 9 the value of purchases supplied from EC countries.
As a VAT registered business it is up to you to find all these numbers and put them into the right boxes.
2. When is Your First VAT Return Due?
The deadline for quarterly and monthly VAT returns and payments are due 1 month and 7 days after the end of a VAT period. You’ll have chosen your VAT period end date when you registered for VAT.
If you aren’t sure when your VAT period ends, then log into your VAT online account to check. This contains essential information about your registration, access to your VAT registration certificate as well as your businesses VAT return dates & payment deadlines.
3. Set Up a Digital Bookkeeping System
If you haven’t already, you’ll need to use an HMRC approved digital bookkeeping system like Xero to do your bookkeeping and send your completed VAT return to HMRC. You’ll need to enter all your sales invoices, credit notes and purchase invoices onto the system. You’ll also need to code them correctly for VAT and the system will automatically work out your VAT for you as well as what numbers should appear on each of the nine boxes of your return.
This requirement to use an approved bookkeeping software is known as making tax digital. This is the complete digitisation of the tax system to avoid mistakes made by doing manual bookkeeping or using bookkeeping spreadsheets.
4. How to Complete Your VAT Return
If you already use a bookkeeping system for your accounting, you’ll need to activate the VAT functionality. If you are setting up for the first time, you’ll be asked if you are VAT registered as part of your business setup.
If you are using Xero you can activate the VAT function by clicking on Accounting > Advanced > Financial Settings. Here, you can enter your VAT number, choose your VAT scheme and VAT return dates.
You’ll then need to set up your HMRC connection for Making Tax Digital so that Xero can send your completed VAT return directly to them.
When you complete your first VAT return, you’ll need to make sure that you show the VAT amount on all the transactions you record in Xero from the date you registered for VAT. You’ll find this date on your VAT registration certificate in your .GOV business tax account.
5. Claiming Back VAT on Expenses on Your First VAT Return
You can claim back VAT on expenses that you’ve paid for in your business. You can’t claim VAT back on anything you’ve bought or used personally. However, if you use something for business and personal reasons, you’ll be able to claim back VAT on the business portion. For example, you use your laptop for business reasons 75% of the time and 25% personal. You’ll be able to claim back 75% of the VAT you paid for the laptop.
You may also be able to claim back VAT on certain purchases you made before you were VAT registered. You can go back and claim VAT on expenses depending on what you have bought:
- 4 years for goods you still have, or that were used to make other goods you still have;
- 6 months for services.
Read this guide to find out how far back you can claim VAT on expenses.
6. Viewing Your Completed VAT Return
Once you’ve recorded all your VAT transactions, your bookkeeping software will automatically complete your VAT return for you, calculating the numbers you need to include. That’s why it is really important to make sure you record all your transactions correctly when you enter them, that way you’ll have peace of mind your VAT is correct.
To view your VAT return you’ll need to go over to the VAT function of your bookkeeping software. In Xero you’ll find this in the accounting section, where it’s called VAT Return (if you can’t see this as an option in the dropdown menu, then you’ll need to find it in the Reports section where you can favourite it so it appears in the menu).
You’ll be able to see your completed VAT return for your VAT period. You’ll also be able to view your transaction by VAT box, which is useful because you can do a check to ensure everything is correct before you submit your completed VAT return.
7. How to Submit Your Completed VAT Return
Once you have checked the numbers included in each of the 9 boxes on your VAT return, you can authorise your bookkeeping software to submit these straight to HMRC on your behalf.
You’ll need to connect your software to your HMRC tax account by entering your .GOV login details, then once you are ready to submit your VAT return just press the button to ‘Submit to HMRC’. You’ll be notified by your software that your return was successfully submitted and also receive an email from HMRC to confirm receipt. Finally, you’ll then need to make sure you pay your VAT to HMRC.