If you’re interested in the answer to the question, “What is a VAT return?”, you’ve come to the right place. VAT – value added tax – is a form of consumption tax that is added onto goods and services. In this blog, we’ll explore what a VAT return is and what it means for you.

If you need expert tax guidance, Williamson & Croft are here to help. Welcome to the world of VAT – let’s dive right in.

What Is a VAT Return? A Brief Definition

A VAT return is a form that must be completed and sent to HM Revenue and Customs (HMRC) to inform them of how much VAT you have charged and the amount you have paid to other businesses.

You will need to send a VAT return to HMRC usually every three months or within your accounting period. No matter if you have no VAT that needs to be paid or reclaimed, a VAT return still needs to be sent to HMRC.

Who Pays VAT?

When it comes to VAT, this is typically paid by the final consumer when purchasing goods and services. However, in this specific blog, we’ll be focusing on VAT that is payable by VAT-registered businesses and that will require a VAT return.

So, who does a VAT return? In essence, any company that has a taxable turnover of more than £85,000 will need to register for VAT. This can include:

Small Businesses

The UK government defines a small business as having:

  • £10.2 million or less turnover
  • £5.1 million or less on balance sheet
  • 50 employees or less

If you meet the VAT threshold, VAT payments will need to be made to HMRC. You’ll ideally charge VAT on your own goods and services, as well as be charged VAT from suppliers that you purchase from.

Sole Traders

Sole traders are self-employed individuals who run their own businesses and are responsible for any losses. If your business’ annual turnover falls within the VAT registration threshold, you’ll also need to make VAT payments.

Typically, you’ll be paying VAT for everything that you might purchase for your business.

Companies and Limited Liability Partnerships

A limited liability partnership (LLP) is a partnership where a minimum of two partners have limited personal liability. In the meantime, a company, or limited company has share capital, a distinct entity from the shareholders involved.

VAT can be charged on commission, goods or items sold to employees, non-sales, and more.

What Is Included in a VAT Return?

A VAT return includes different types of tax and figures, including:

  • Output Tax (VAT charged on sales)
  • Input Tax (VAT paid on business purchases)
  • Amount of VAT you’re reclaiming from HMRC
  • Total sales and purchases

The total input tax is offset against the total output tax to discover the amount that you either owe to HMRC or the amount you can reclaim.

What Is the Flat Rate Scheme?

Instead of calculating the difference between the total input tax and total output tax, businesses could be eligible to join the Flat Rate Scheme which enables them to:

  • Pay a fixed rate of VAT
  • Keep the difference between the amount charged to customers and the amount paid to HMRC

To apply, your VAT turnover must be £150,000 or less.

If you’re interested in joining, we encourage you to talk to a tax specialist from Williamson & Croft for guidance on whether the Flat Rate Scheme is suitable for you.

When Do Businesses Need to Submit a VAT Return?

VAT returns should be submitted, at the latest, one calendar month and seven days after the end of your accounting period. This is normally every three months, at least four times a year.

If you’re part of the VAT Annual Accounting Scheme, VAT returns are due once each year, usually two months after your accounting period.

How to Complete a VAT return

Now that you know the answer to, “What is a VAT return?”, you should be able to complete a VAT return. This can be done in the following ways:

  • Utilising accounting software
  • Using a VAT online account if you use the VAT Annual Accounting Scheme
  • By hiring an accountant or tax specialist from Williamson & Croft

Digital Submissions through HMRC’s Online Platform

VAT returns can be submitted virtually through HMRC’s online platform – Making Tax Digital (MTD) for VAT. If you’re unsure about this process, we recommend seeking professional tax advice from experts like Williamson & Croft.

For Assistance with VAT Returns, Trust in Williamson & Croft

If you require assistance with VAT returns or want to learn more about VAT payments for your business, please don’t hesitate to contact Williamson & Croft for our tax and accounting services. You can rely on us for your accounting needs.

Call 0151 303 3112 today.