A VAT return can look deceptively simple: nine boxes, a deadline and a payment. Yet knowing how to submit VAT returns properly depends on the quality of the records behind those boxes. For many small businesses, the pressure comes not from filing itself, but from trying to reconcile months of invoices, receipts and bank transactions a few days before the deadline.
The most reliable approach is to treat VAT as an ongoing bookkeeping process rather than a quarterly task. With organised records and compatible software, submitting your return becomes a straightforward check, file and pay routine – not a late-night scramble.
What a VAT return does
A VAT return tells HMRC how much VAT your business has charged on sales and how much VAT it has paid on eligible business purchases during an accounting period. The difference determines whether you owe HMRC VAT or are due a repayment.
Most VAT-registered businesses submit returns every quarter, although monthly and annual accounting periods are available in certain circumstances. Your VAT accounting period, filing deadline and payment deadline are shown in your HMRC VAT online account and should be built into your financial calendar.
The return includes nine boxes. In practical terms, you report VAT charged to customers, VAT reclaimable on purchases, the amount payable or repayable, and the total value of sales and purchases excluding VAT. The figures need to reflect your chosen VAT accounting scheme, which is why using the right method matters as much as entering the numbers accurately.
Before you submit a VAT return, check your VAT method
Your VAT scheme affects when transactions appear on the return. Under standard VAT accounting, you normally account for VAT according to the invoice date. This can mean declaring output VAT before a customer has paid you.
Under the VAT Cash Accounting Scheme, VAT is generally accounted for when money is received from customers or paid to suppliers. This can support cash flow for eligible businesses, but it requires your records to show payment dates clearly.
The Flat Rate Scheme works differently again. You charge VAT at the usual rate, but pay HMRC a fixed percentage of your VAT-inclusive turnover. You usually cannot reclaim VAT on everyday purchases, although there are exceptions for certain capital assets. It can reduce administration, but it is not automatically the most cost-effective option, particularly where a business has significant VAT-bearing costs.
If you buy services from overseas suppliers, sell internationally, use the domestic reverse charge in construction, or reclaim VAT on more unusual costs, seek advice before filing. These areas often need specific treatment and small errors can carry into later returns.
Get your records ready throughout the quarter
VAT returns are only as sound as the bookkeeping that supports them. HMRC requires VAT-registered businesses to keep digital VAT records, and most businesses must use Making Tax Digital-compatible software to submit their returns. A spreadsheet may help with internal analysis, but it cannot normally be used as the sole tool for digital VAT submission without compatible software and a compliant digital journey.
Good records should show sales invoices, purchase invoices, credit notes, VAT rates, dates, supplier details and payment information where relevant to your scheme. Keep evidence for expenses too. A bank transaction alone does not always prove that VAT can be reclaimed: you will usually need a valid VAT invoice or other acceptable evidence.
Before the end of each quarter, reconcile your accounting software to your business bank account and review any unexplained transactions. Check that sales have been invoiced correctly, purchase bills have been entered with the right VAT rate, and personal expenditure has not been included by mistake. This regular work is what prevents a VAT return becoming an exercise in guesswork.
How to submit VAT returns through Making Tax Digital
For most businesses, the process takes place through accounting software connected to HMRC. Exact screens vary by provider, but the practical sequence is similar.
1. Confirm the accounting period and deadline
Start by checking the period your return covers. Do not assume it always follows the calendar quarter. Filing or paying late can lead to HMRC penalty points and, where points build up, financial penalties. Interest may also apply to late payments.
For quarterly returns, the deadline is commonly one calendar month and seven days after the end of the accounting period. For example, a period ending on 31 March would normally have a filing and payment deadline of 7 May. Your own deadlines may differ, so always rely on the dates shown by HMRC.
2. Review the VAT report in your software
Run the draft VAT return and inspect the figures before submitting. Compare sales to prior periods and to your management accounts or bank receipts. A large movement is not necessarily wrong – seasonal trading, a major project or a one-off purchase may explain it – but it is worth understanding.
Look closely at unusual VAT codes, zero-rated sales, exempt income and transactions with no VAT. Also review any manual journals. These entries can be valid, but they deserve extra scrutiny because they can alter the VAT position without an invoice sitting behind them.
3. Check what VAT you can reclaim
You can generally reclaim VAT on costs incurred wholly for the business, provided you have the right evidence and the expense is not blocked from VAT recovery. Client entertainment is a common example of a cost where VAT cannot normally be reclaimed. There are also special rules for cars, fuel, mixed business and personal use, and certain staff costs.
It is sensible to be cautious rather than claim VAT simply because it appears on a receipt. If an expense has a mixed purpose, only the business element may be recoverable. Clear records and a consistent approach are especially valuable if HMRC asks questions later.
4. Submit the return digitally
Once you are satisfied that the figures are complete and accurate, submit the return through your Making Tax Digital-compatible software. Save the submission confirmation and a copy of the final VAT report with your records. This creates a useful audit trail and makes future queries much easier to answer.
Submitting the return does not always mean payment has been made. Check your VAT account after filing and arrange payment separately unless you have a Direct Debit in place.
5. Pay HMRC by the deadline
Direct Debit can help avoid missed payment dates, but it must be set up in good time. Other payment methods may take several working days to reach HMRC, so leaving payment until the final day creates avoidable risk.
If you expect a VAT repayment, make sure HMRC holds the correct bank details. Repayments are often processed after the return has been submitted, although HMRC may make checks before releasing funds.
Common mistakes when submitting VAT returns
The most frequent mistakes are rarely complicated. They include using the wrong VAT rate, reclaiming VAT without a valid invoice, omitting cash sales, recording gross figures where net figures are required, and including transactions in the wrong period.
Another common issue is confusing zero-rated, exempt and outside-the-scope income. They may all result in no VAT being charged, but they are not interchangeable and can affect how the return is completed. If your business has exempt income, partial exemption rules may limit the VAT you can reclaim.
Do not ignore errors discovered after submission. Smaller net errors can often be corrected on the next VAT return, provided they are within HMRC’s permitted limits. Larger errors, or errors that exceed the relevant percentage threshold, generally need to be disclosed separately. The right route depends on the size and nature of the mistake, so it is worth checking before making an adjustment.
Create a routine that keeps VAT manageable
The best VAT process is usually a short monthly routine. Set aside time to raise and enter invoices, match transactions, upload receipts and review outstanding customer balances. Then, when the VAT period ends, there is far less to do.
For a growing business, cloud accounting software can provide a clearer view of VAT due before the deadline arrives. It also helps directors see whether a strong sales month will lead to a higher VAT payment, allowing time to protect cash flow rather than being caught out later.
Where bookkeeping is handled internally, a second review before submission can provide useful reassurance. Where time is limited, outsourced bookkeeping and VAT support can remove the administrative burden while leaving you with clear, timely information about what your business owes.
When to ask for support
VAT becomes more complex when your business starts trading internationally, enters the construction sector, changes its legal structure, makes property-related transactions or moves between VAT schemes. The same is true if turnover approaches the VAT registration threshold or if you are considering voluntary registration.
At Coombs Chartered Accountants, we help Manchester businesses keep their VAT records organised, understand their obligations and submit accurate returns on time. The aim is not simply to file nine boxes, but to give you confidence in the figures and more time to focus on running the business.
A calm VAT quarter starts well before the deadline: keep records current, review the figures with care, and ask for advice when a transaction does not fit the usual pattern.
