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Navigating VAT returns: A step-by-step guide for UK SMEs

Simplifying the VAT return process, especially for businesses new to handling their own finances.

Value Added Tax (VAT) can seem like a daunting aspect of running a small or medium-sized enterprise (SME) in the UK, especially for those in the £90,000 to £1,000,000 turnover range. Understanding how to manage and submit VAT returns is crucial for compliance and financial efficiency. Here’s a straightforward guide to help you navigate the process.

Understand your VAT responsibilities

The first step is understanding whether your business needs to be VAT registered. If your turnover exceeds the current VAT threshold (£90,000), registration is mandatory. It's also important to know the different VAT schemes available, such as the Flat Rate Scheme, which might suit your business better.

Keep accurate records

Accurate record-keeping is essential for managing VAT. This includes all sales and purchases, VAT invoices, and import and export records. Utilising software like Xero can simplify this process, ensuring that your financial data is accurate and easily accessible.

Choose your VAT accounting period

Typically, VAT returns are submitted quarterly. However, you can apply to use the Annual Accounting Scheme if it better suits your business’s cash flow and accounting processes. Decide which period works best for you and stick to it.

Calculate your VAT

Determine how much VAT you owe or are owed by HMRC. This involves summing the VAT charged on your sales (output tax) and subtracting the VAT you’ve paid on purchases (input tax). If you're using a special scheme, ensure you’re following the correct calculation method.

Submit your VAT return

VAT returns must be submitted online through your VAT online account or via accounting software like Xero, which can submit the return directly to HMRC. Ensure your return is accurate and submitted before the deadline to avoid penalties.

Make your VAT payment

If you owe VAT to HMRC, ensure you pay before the deadline. Various payment methods are available, including direct debit, bank transfer, and online payments. If you’re due a VAT refund, HMRC will usually pay it directly into your bank account.

Stay informed on VAT changes

VAT regulations can change, so it’s crucial to stay informed about any updates that might affect your business. Regularly check the HMRC website or consult with a financial advisor to keep up-to-date.

Navigating VAT returns doesn’t have to be overwhelming. By understanding your responsibilities, keeping accurate records, and utilising available tools and schemes, you can ensure that your business remains compliant and financially sound. Remember, seeking advice from accounting professionals can also provide valuable support and clarity in managing your VAT efficiently.

Did you know?

Evolve Accounting offers expert VAT management services, guiding UK SMEs through the complexities of VAT registration, calculation, and submission. Our team is here to ensure your VAT handling is seamless and compliant. For personalised advice and support with your VAT returns, contact us today.


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