VAT Returns

A VAT return may look simple: VAT charged on sales minus VAT reclaimed on purchases. However, the return is only as accurate as the bookkeeping behind it.

Incorrect data can result in too much VAT being paid, invalid claims or missed VAT reclaims. Software helps, but it cannot judge whether transactions are correct.

What Should Be Checked?

Before submitting a VAT return, review the sales, purchases and bank records for the period.

Check that all sales invoices and credit notes are included with the correct VAT rate. Consider whether transactions are standard-rated, reduced-rated, zero-rated, exempt or outside the scope of VAT.

For purchases, confirm that the expense is business-related and supported by a valid VAT invoice. A payment leaving the bank does not automatically mean that VAT can be reclaimed. Missing or incomplete receipts should be investigated before submission.

The bank should be reconciled to the accounting records. Otherwise, transactions could be missing, duplicated or posted incorrectly.

What Do the VAT Return Boxes Mean?

The UK VAT return contains nine boxes:

• Box 1: VAT due on sales and other outputs.
• Box 2: VAT due on relevant goods acquired into Northern Ireland from EU countries.
• Box 3: Total VAT due, calculated from Boxes 1 and 2.
• Box 4: VAT reclaimed on eligible purchases and expenses.
• Box 5: The net amount payable to HMRC or reclaimable.
• Box 6: Total sales excluding VAT.
• Box 7: Total purchases and expenses excluding VAT.
• Boxes 8 and 9: Certain movements of goods between Northern Ireland and the EU.

Boxes 6 and 7 should not be overlooked. Unexpected figures may reveal duplicated sales, gross amounts entered as net, or items such as wages, dividends and loan repayments being included incorrectly.

Making Tax Digital and Software

Most VAT-registered businesses must keep digital records and submit returns using compatible software. However, Making Tax Digital does not remove the need to review the return.

The software processes the information entered. Incorrect VAT codes, reverse charge treatment or import VAT entries can therefore still produce an incorrect return.

Before submission, ask whether the VAT payable or reclaimable looks reasonable compared with previous periods. Check the supporting invoices, reconcile the bank and investigate unusual figures.

A careful review reduces errors, supports valid claims and gives the business confidence that its VAT return is complete and accurate. Businesses should also understand how their chosen VAT accounting method affects when VAT is reported.