VAT

7. VAT Returns

7.1 In general, you pay VAT on a quarterly basis. Each three months is called a 'VAT period'. Ask HM Revenue & Customs to make your VAT periods fit in with your accounting year.

• Every three months, you will receive a VAT return (VAT 100).
• The completed VAT return, plus any VAT owed by you, must be received by HM Revenue & Customs by the end of the month following the VAT period.

7.2 Take the information directly from your accounting records.

• The records, which you must keep, should show input tax, output tax and payments due to or from HM Revenue & Customs. Your records must separate out standard-rated, exempt and zero-rated supplies. You must also detail any overseas sales.
• If you use a simple book-keeping system to control your business - and for your HM Revenue & Customs tax returns - you have already done most of the work for VAT. (See Simple book-keeping).

7.3 Each sale has a tax point. This is the date by reference to which you become liable to pay VAT. The tax point may be:

• The date of supply.
• The date of issue of the invoice.
• The date you receive payment.

7.4 HM Revenue & Customs may visit your premises to check your records. If your VAT returns are incorrect you will be charged interest on late payments and may be fined.

• If, after sending in a return, you find you have miscalculated by over £2,000, send a voluntary disclosure letter to HM Revenue & Customs explaining the error, and enclosing a payment of the VAT due (or asking for a repayment of VAT overdeclared).
• If an HM Revenue & Customs inspection uncovers any 'misdeclaration' of liability, the penalties can be severe.

7.5 You must keep copies of all your invoices and VAT returns for at least six years.