This guide will help you navigate your first VAT return, providing tips on deadlines, locating necessary figures, and submitting your completed return to HMRC.

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Still unsure about VAT? Check out our guide: "What is VAT and How Does it Work."

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Last updated: 29 July 2021

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Table of Contents

1. What is a VAT Return?

2. When is Your First VAT Return Due?

3. Setting Up a Digital Bookkeeping System

4. Completing Your VAT Return

5. Claiming Back VAT on Expenses in Your First VAT Return

6. Viewing Your Completed VAT Return

7. Submitting Your Completed VAT Return

 

1. What is a VAT Return?

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A VAT return is a quarterly (or sometimes annual) form that VAT-registered businesses submit to HMRC. It reports how much VAT you’ve collected from your sales and how much VAT you’ve paid on your purchases. If your payments exceed your collections, you may be eligible for a VAT refund from HMRC.

A typical VAT return consists of nine boxes that summarize your sales, purchases, and VAT for a given period. Here’s an overview of the key boxes:

• Boxes 1 & 2: VAT collected from sales (output tax), including sales to EU countries.

• Box 4: VAT on purchases (input tax) that you want to reclaim.

• Box 5: The net VAT amount to pay HMRC or reclaim from them.

• Box 6: Total sales excluding VAT for the period.

• Box 7: Total purchases excluding VAT for the period.

• Boxes 8 & 9: Value of exports to and purchases from EU countries.

It’s your responsibility as a VAT-registered business to gather the numbers for each box and report them accurately.

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2. When is Your First VAT Return Due?

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The deadline for filing and paying VAT is typically 1 month and 7 days after the end of your VAT period. You can check your VAT period and deadlines in your online VAT account, which also contains essential registration details and access to your VAT certificate.

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3. Setting Up a Digital Bookkeeping System

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You’ll need to use an HMRC-approved digital bookkeeping system, such as Xero, to maintain your records and submit your VAT return. The software will automatically calculate your VAT figures for each of the nine boxes on the return based on the data you enter, including sales invoices, credit notes, and purchase invoices.

This digital requirement is part of HMRC's "Making Tax Digital" initiative, designed to reduce errors from manual bookkeeping.

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4. Completing Your VAT Return

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If you're using a bookkeeping system, ensure the VAT functionality is activated. For instance, in Xero, go to Accounting > Advanced > Financial Settings to input your VAT number and select your VAT scheme and return dates.

You’ll also need to connect your software to HMRC’s system to comply with Making Tax Digital. Once set up, Xero will send your completed VAT return directly to HMRC.

When completing your first return, include VAT for all transactions since your registration date, which is available on your VAT certificate in your .GOV account.

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5. Claiming Back VAT on Expenses in Your First VAT Return

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You can reclaim VAT on business expenses but not on personal purchases. If you use something for both personal and business purposes (e.g., a laptop), you can only reclaim VAT on the business portion. For instance, if 75% of your laptop use is for business, you can claim 75% of the VAT.

You may also reclaim VAT on certain purchases made before registering for VAT:

• Up to 4 years for goods you still have or used to make other goods you still have.

• Up to 6 months for services.

Learn more in our guide on claiming VAT for past expenses.

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6. Viewing Your Completed VAT Return

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Once your transactions are recorded, your software will automatically compile your VAT return. It’s important to ensure all transactions are entered correctly to avoid mistakes.

To view your VAT return, navigate to the VAT section of your software. In Xero, this can be found under Accounting and is labeled "VAT Return." You can also view your transactions by VAT box, which is helpful for verifying accuracy before submission.

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7. Submitting Your Completed VAT Return

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After reviewing your return, you can authorize your bookkeeping software to submit it directly to HMRC. Simply connect your software to HMRC using your .GOV login credentials and click "Submit to HMRC." You’ll receive confirmation from both your software and HMRC via email.

Finally, ensure that you pay any VAT due to HMRC.

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Related Resources:

• Making Tax Digital Explained

• How Far Back Can You Claim VAT on Expenses?

• VAT Schemes Explained

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