Thanks to HMRC's Making Tax Digital initiative, filing your VAT Return has taken a digital turn. However, this does not mean you can simply sit back and let the computer do all the work: as a VAT-registered business during these changing times, staying on top of your tax obligations has never been more crucial. Now that most businesses must send their VAT Return online through compatible software (such as AbraTax), here is a step-by-step guide to help ensure seamless compliance.

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Know the Deadlines

Being aware of deadlines is the first step towards successful VAT Return submission. Returns are due quarterly (every 3 months). This is known as your accounting period. The deadline for filing your quarterly VAT Return is usually one calendar month and seven days after the end of each accounting period.

Timeliness is key – needless to say, late submissions could result in penalties. HMRC provides a helpful VAT payment deadline calculator to double-check your timelines. Make sure not to let your payments slip!

Organise Your Documentation

Before you begin the VAT process, gather all relevant financial records, including invoices for sales and purchases, receipts, and details of any VAT-exempt transactions (see below). Proper organisation will help you avoid errors and omissions, and it will assist in the event that HMRC asks for more detail regarding your Returns.

Remember: it’s easiest to stay organised if you keep it up from the very start. HMRC provides a detailed guide for VAT records here. For general tips on efficient record-keeping for your business, check out this article.

Choose Compatible Software

Since Making Tax Digital is now in effect for VAT, filing your VAT return manually is no longer a viable option (excepting rare cases). Ensure that you're using HMRC-recognised bridging software (such as AbraTax) that is compatible and fully compliant with HMRC's digital reform. Bridging software can provide varying levels of service, including comprehensive VAT history, multiple VAT registrations and guaranteed long-term compliance.

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Prepare the Necessary Figures

When using digital bridging software such as AbraTax, you'll notice several fields or boxes to complete. These constitute the 9 most essential pieces of VAT information for your business’s VAT Return:

  1. VAT due on sales and other outputs
  2. VAT due on acquisitions from other EC Member States*
  3. Total VAT due (sum of (1) and (2))
  4. VAT reclaimed on purchases/other inputs
  5. Net VAT
  6. Total sales excl. VAT
  7. Total purchases excl. VAT
  8. Total value of goods sold to other EC Member States
  9. Total value of goods acquired from EC Member States

*Requirements relating to EC Member States following the UK's withdrawal from the EU are undergoing change and information here might be outdated. Please pay attention and check for the latest details from HMRC (e.g. here). Rest assured, active AbraTax software remains up to date with policy changes.

Double-check all figures for accuracy before submitting. Using bridging software such as AbraTax can help automate this process from within your Microsoft Excel spreadsheet – without needing to manually input individual data online each time. With AbraTax, figures 3 and 5 are automatically calculated.

Reclaim VAT on Business Expenses

You can claim back the VAT paid on eligible business expenses, often referred to as Input Tax or Input VAT. You can usually reclaim VAT from business travel expenses (for you or for an employee) or for vehicles used exclusively for your business purposes. HMRC provides further details here.

If any eligible items are for combined business and personal use, then you must calculate and claim only the proportion of business on for that VAT. For instance, if 65% of your phone calls are for business, then you can claim up to 65% of the VAT on your handset cost and phone plan.

If you have mistakenly reclaimed VAT on goods or services which you did not pay for, you must repay HMRC in a process called clawback. Always ensure that you have the appropriate documentation to support your VAT claims.

Finalise and Pay

Once you're confident that your VAT return is accurate, submit it through your chosen software and proceed to payment. Software solutions such as AbraTax offer integrated payment options, making it easier to pay HMRC directly. Remember to keep secure (digital) records of all relevant documents for future reference or HMRC audits.

Periodic Reviews

As our financial landscape is continually evolving, even the most seasoned business owners can overlook new allowances or exemptions. Make it a habit to review your VAT Return process regularly to ensure it remains accurate and up to date. For maximum peace of mind, make sure to choose HMRC-recognised bridging software that ensures long-term compliance.

Conclusion

The digitalisation of VAT Returns in the UK has streamlined the submission process but also added new layers of detail and compliance. Staying organised, using compatible software, and adhering to deadlines will help you maintain a smooth relationship with HMRC. By taking these steps seriously, you can contribute positively to your business's financial health and avoid unnecessary headaches. AbraTax, our HMRC-recognised bridging software, can help streamline the process and allow you to take better control of your finances.

If you found this article helpful, why not check out our other articles for more guides and top tips on tax?

Disclaimer: We aim to offer educational articles on our blog, focusing on tax-related topics. However, it's important to note that over time, the relevancy of this content might diminish, and we cannot guarantee accuracy. While these articles serve as a tool for enhancing tax knowledge, they are not a replacement for expert advice in accounting, taxation, or legal matters, given the unique nature of each individual's situation. Should you require personalized assistance, we encourage contacting HM Revenue and Customs (HMRC).