VAT is generally paid to HMRC on the basis of quarterly VAT periods
- Administration can be made easier by asking HMRC for VAT periods that fit in with your accounting year.
- If your turnover exceeds the VAT registration limit (currently £85,000), the new HMRC initiative Making Tax Digital (MTD) will apply to you from 1 April 2019. VAT returns must be submitted via HMRC compatible software.
- All VAT returns must be filed online and VAT must be paid electronically.
- Online VAT returns and payments are due one month and seven days after the end of the VAT period.
Figures declared on VAT returns should be taken directly from your accounting records
- The records, which must be kept for six years, should show input VAT, output VAT and payments due to or from HMRC. Records must separate out standard-rated, reduced-rated, exempt and zero-rated supplies. They must also detail any imports or exports.
- If MTD applies to you (business turnover exceeds £85,000) your records must be in a digital format which integrates with HMRC-approved software for submitting returns.
- If a simple book-keeping system is used to control the business, little additional work will be required to complete VAT returns). If a business makes both exempt and VATable supplies, more complex accounting is likely to be required.
Each sale or purchase has a tax point: the date used for VAT accounting
- The basic tax point is the date of supply.
- If a VAT invoice is issued or payment is received in advance, the tax point is whichever is earlier.
- The tax point is delayed to the invoice date if a VAT invoice is issued within 14 days of the date of supply.
HMRC visits businesses to check their records
- If VAT returns are found to be incorrect, interest and penalties may be charged.
- If, after sending in a return, a miscalculation of over £10,000 is discovered, a voluntary disclosure letter or VAT 652 should be sent to HMRC explaining the error, and enclosing a payment of the VAT due (or asking for a repayment of VAT over declared).
- Adjustments of less than £10,000 can be made on the next VAT return but records need to be retained to justify the entry.