What is a VAT Return?
A VAT Return is a report a VAT-registered business submits to HMRC, usually every three months, summarising the VAT it has charged on sales and the VAT it has incurred on purchases during that period. The return calculates whether the business owes VAT to HMRC or is due a refund.
How does a VAT Return work?
Each VAT period, the business totals the output VAT charged on its taxable sales and the input VAT it has incurred on eligible purchases. If output VAT is higher than input VAT, the difference is paid to HMRC. If input VAT is higher, for example because the business made large purchases or capital investments in that period, HMRC generally repays the difference.
When are VAT Returns due?
Most businesses submit VAT Returns quarterly, with the return and any payment due one calendar month and seven days after the end of the VAT period. Some businesses use other arrangements, such as monthly returns or the Annual Accounting Scheme, which changes the filing pattern.
VAT Returns and Making Tax Digital
VAT-registered businesses must keep digital VAT records and submit VAT Returns using Making Tax Digital compatible software, rather than filing manually through HMRC's website. This generally means using accounting software or a bridging tool that connects to HMRC's systems.
Late VAT Returns and penalties
HMRC operates a points-based penalty system for late VAT Returns, where a business accumulates a point for each missed deadline, and a financial penalty applies once a points threshold is reached. Separate late payment penalties and interest can also apply if VAT owed is not paid on time, so keeping filing and payment dates on track is an important part of VAT compliance.
Related terms: VAT, Input VAT, Output VAT, VAT Registration, Making Tax Digital.
VAT rules depend on the nature of transactions and individual circumstances. This glossary provides general information and is not personalised tax advice.