Completing your first VAT return
When completing your first VAT return the first message is, don’t panic! The Return in itself is not a difficult form to complete so don’t ignore it and then be late submitting it to HM Revenue & Customs (HMRC). If you are late, you may be liable to a default surcharge.
The reputation of the “dreaded” VAT Return is perhaps more to do with paying over the VAT and sorting out your accounting records rather than the calculation and completion of the Return itself. We recommend making provision for the payment by putting aside sufficient funds into a separate tax savings account as you go along.
How you fill in your return will depend on whether you have joined the flat rate scheme or not.
Standard returns
You need to obtain a summary of your sales invoices, which will give you both your VAT due on sales and your total value of sales (excluding VAT) (boxes 1 and 6). Box 2 will normally be ‘none’ and so Box 3 should equal Box 1.The VAT reclaimed on purchases and the total value of purchases excluding VAT (Boxes 4 and 7) will be extracted from your record of purchases.
The difference between the VAT that you have invoiced on your sales (output tax) and the VAT that you have been charged on your expenses (input tax) is the tax you pay and is entered into Box 5. This must be remitted to HM Revenue & Customs within a month of the Return date.
If you buy something for your business prior to, but in anticipation of, registration, you can claim back the input tax. It is not uncommon with your first VAT Return for there to be a repayment because your expenses can often exceed your income
The flat rate scheme
If you are using the flat rate scheme you need to obtain a schedule of your total gross sales invoices, and you need to put the value of your sales including VAT into Box 6. Multiply this figure by the applicable flat rate to calculate the VAT due under the flat rate scheme, and put this figure into Box 1. Since Box 2 will normally be ‘none’, Box 3 should equal Box 1.Box 4 will also generally be ‘none’, as will Box 7, unless you have acquired a capital asset costing more than £2,000 (including VAT).
The difference between Box 3 and Box 4 is the tax you pay and is entered into Box 5. This amount must be remitted to HM Revenue & Customs within 30 days of the Return date.
Where next?
Within VAT
- Should I be registered for VAT?
- Should I register for a VAT accounting scheme?
- VAT records
- Tax point
- Can I reclaim all the VAT on my motor expenses?
Within Your partnership
- Setting up
- Accounting systems
- Payroll and PAYE
- National Insurance Contributions
- Income tax
- Exiting a partnership
