My first VAT return is due. What do I need to do?

My first VAT return is due. What do I need to do?

When you come to complete 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. 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 hunting out your accounting records rather than the calculation and completion of the return itself. We advocate making provision for the payment by putting aside sufficient funds into a separate tax savings account as you go along.

All VAT returns must now be submitted online.

We explain here how to register for Online VAT returns and here we explain exactly how to submit a VAT return online  going through each of the stages step by step.

You also need to understand information that needs to be included within your VAT return.  You will need to gather the information listed below:

  • Schedule of your fees received: Chambers will provide you with a schedule of your fees received which will provide both the VAT due on fees (output tax) and the value of fees.
  • Your record of payments, in whatever forms you maintain it, will provide the VAT reclaimable (input tax) and the total value of purchases.   Please be aware that not all expenditure is subject to VAT (eg books and insurance) so make sure you check the receipt.

The difference between the VAT that you have collected on your fees (output tax) and the VAT that you have been charged on your business expenses (input tax) is the tax that you pay and is calculated for you on the return. This must be remitted to HM Revenue & Customs within a month and seven days of the return date.

If you buy something for your practice, such as your wig and gown, 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. Ask us for guidance if you are at all in doubt.

If you use your car for business purposes, you can recover the VAT input tax incurred on fuel but if used at all for private purposes (which is likely) then you need to charge output tax on a standard scale rate to account for the private use.  You should consider carefully whether you undertake sufficient business travel to justify claiming VAT on petrol as you can opt out of declaring VAT Fuel Scale Charge if you do not reclaim input tax on petrol in the first place.  We can help you with this calculation. The actual VAT Fuel Scale Charge Rates are here as you will need them for your calculations.

The above points are relevant to the standard method of VAT accounting, if you use flat rate or annual accounting schemes then please seek assistance on the completion of your first return.

 

This answer was last checked May 2017. This answer is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.