A simple guide to paying your first VAT return

The process of sending off your first VAT return can feel daunting in the beginning. This article takes you step-by-step through setting up a Making Tax Digital compliant bookkeeping system, entering your VAT transaction records, reviewing them and sending off your completed VAT return to HMRC.

Working out your VAT deadline

"The deadline for submitting your return online is usually one calendar month and 7 days after the end of an accounting period. This is also the deadline for paying HMRC. You need to allow time for the payment to reach HMRC’s account." - HMRC

You can check when your VAT period ends by logging into your VAT online account. This includes important information about your registration, access to your VAT registration certificate as well as your businesses VAT return dates & payment deadlines.

Use a Making Tax Digital bookkeeping system

You can use a HMRC approved digital bookkeeping system like Quickbooks to complete your bookkeeping and send your completed VAT return to HMRC. Input all of your sales invoices, credit notes and purchase invoices onto the system. Make sure to correctly code your VAT inputs, then the system should automatically calculate your VAT, including the numbers that will be displayed on each of the nine boxes on your return.

Using an approved bookkeeping software is a requirement which is also known as making tax digital. This refers to the complete digitisation of the tax system with the aim of mitigating mistakes which can occur by performing manual bookkeeping (including bookkeeping spreadsheets).

Activate VAT functionality & connect to HMRC

You'll need to activate the VAT functionality if you are using a bookkeeping system already for your accounting. When setting up your business using a bookkeeping system, you should be asked if you are VAT registered.

Once this has been done, you’ll should be able to set up your HMRC connection for MTD (Making Tax Digital) so that your bookkeeping system can send your completed VAT return directly to them.

Ensure that you show the VAT amount for all transactions recorded in your bookkeeping system from the date that you registered for VAT. To find this date, check out your VAT registration certificate in your .GOV business tax account.

Claim back VAT on expenses

You can claim back VAT on expenses that you have paid for in your business. Of course, you won't be able to claim VAT back on things that you’ve bought or used personally. However, if you have used something for business and personal reasons, you’ll be able to claim back VAT on the business portion.

For example, if you use your computer for business reasons 70% of the time and 30% personal, then you’ll be able to claim back 70% of the VAT that you paid for the computer.

If you made particular purchases before you were VAT registered, you may also be able to claim back the VAT. Depending on the items that you bought, you claim VAT back on those expenses. See the following:

• 4 years for goods you still have, or that were used to make other goods you still have;

• 6 months for services.

View your completed VAT return

Your bookkeeping system should automatically calculate your VAT return once you have submitted all of your VAT transactions. Make sure to enter any transaction records and numbers accurately so that you can relax knowing that your VAT return is correct.

Need to view your VAT return? Navigate to the VAT function which should be included in your bookkeeping system. You’ll can then take a look at your completed VAT return for your VAT period. To be reassured that your completed VAT return is accurate and correct, you should should be able to see an overview of your transaction before you submit the completed VAT return to HMRC.

Submit your VAT to HMRC

At this point, I would advise you to check over the numerical values which will be displayed in the 9 boxes on your VAT return. If you are happy with the VAT return, you can approve your bookkeeping systems to send your completed VAT return directly to HMRC on your behalf.

Enter your .GOV login details to link your bookkeeping system to your HMRC tax account. As soon as you are ready to submit your VAT return, go ahead and click the option to ‘Submit to HMRC’. Then your bookkeeping system should inform you that your VAT return was submitted with success. An email from HMRC should land in your registered email account confirming safe receipt of the VAT return.

Finally, you’ll then need to make sure you pay your VAT to HMRC.