When a UK business uses the standard VAT scheme it has to complete a VAT Return at the end of every VAT period, which is usually 3 months. The VAT Return informs HM Revenue & Customs;
i) How much output VAT is payable on sales
ii) How much input VAT is claimable on purchases
iii) The total amount of sales during the period
iv) The total amount of purchases during the period
v) The total amount of goods sold to customers or purchased from suppliers in other vi)EU countries
So how does a business complete its VAT Return?
A business must complete every single box on the VAT Return and none of them can be left blank. Boxes that are not applicable, or where the figure is zero should be filled in as such. In addition, negative amounts and not applicable boxes are filled differently depending on whether the VAT Return is being submitted online or via the postal system.
When submitting the VAT Return online a minus sign is included before the figure for negative amounts and 0.00 is used for none or not applicable boxes.
When submitting a paper VAT Return negative figures are surrounded by brackets and the word NONE is used for none and not applicable boxes.
Box 1 details the output VAT due on sales and other outputs, which is the total amount of VAT charged on sales to customers over the period. As well as the VAT on sales the figure included in box 1 must also consist of;
i) Any sales to staff, such as canteen meals
ii) Sales of business assets, such as commercial vehicles and machinery
iii) Fuel scale charges
iv) Any goods bought that the reverse charge procedure applies to
v) Gifts or samples given away in excess of £50
vi) Anything bartered, exchanged or part exchanged
vii) Goods or services that the business owner or staff take out of the business for personal use
In addition to the above the business must deduct any credit notes issued and debit notes received.
Box 2 includes the VAT due (but not paid) on acquisitions from other EU countries, and any services directly related to those goods (such as delivery charges). This amount may also be reclaimed and, therefore needs to be included in box 4.
Box 3 is simply the summation of boxes 1 and 2 and is the total amount of VAT due to HM Revenue & Customs. If the VAT Return is being submitted online box 3 is automatically calculated as an software arithmetical check.
Box 4 includes the input VAT reclaimable on purchases. In addition the following should also be included;
i) The VAT paid on imports from countries outside the EU
ii) The VAT on goods removed from a bonded warehouse or free zone
iii) VAT due (but not paid) on goods from other EU countries, i.e. the figure included in box 2
The VAT on credit notes received and the VAT on supplier invoices over six months old that are unpaid need to be deducted.
Box 5 is simply the VAT payable or reclaimable, i.e. the difference between box 3 and box 4. It should be noted that if there is no VAT payable or reclaimable, i.e. the figure is zero the VAT Return still needs to be submitted.
Box 6 consists of the total sales for the period, excluding VAT. The sales figure should include all standard rated, zero rated, reduced rated and exempt sales, the value of goods or services supplied that are subject to the reverse charge, the value of goods or services purchased that are subject to the reverse charge and the value of exports outside of the EU.
Box 7 is simply the total amount of purchases during the period excluding VAT.
Box 8 and box 9 only needs to be completed if the business has supplied goods, or acquired goods from another EU country or countries. Box 8 includes the total value of goods supplied to other EU countries and box 9 includes the total value of goods the business has acquired from other EU countries.
Completing a VAT Return is not difficult, however it does require a bit of thought. Most modern day off the shelf accounting packages includes a VAT module which automatically pulls the required figures from the nominal ledger and puts them in to a pro forma VAT Return that can be printed off. The figures can then be transferred to the paper return, or input on the HM Revenue & Customs website, hence making the process a little easier. When using a computerized accounts package to do this it is important to ensure all invoices have been posted to the accounts system, otherwise some entries for the current VAT quarter will be missed off and included on the VAT Return for the next quarter.