VAT is a government-imposed tax that is levied on a wide range of products and services. If your business is VAT-registered, you'll be required to submit a VAT return to HMRC. Despite this, the laws and regulations governing how to file a VAT return can be complicated, and many firms, particularly small enterprises that are confronting VAT filings for the first time, are unsure of where to begin when submitting their returns. As a result, we've put up a straightforward instruction that explains how to compute a VAT return. To begin, what exactly is a VAT return?
What is the purpose of a VAT return?
From the day you register your business for VAT, you'll be required to charge VAT on every taxable sales made by your company (output VAT). You may also be eligible to claim VAT paid on purchases made by the company, as well as any expenditures incurred by the company (referred to as input VAT). If your output VAT exceeds your input VAT at the conclusion of your accounting period, you'll be required to pay HMRC the difference between the two amounts.
A VAT return is a tax form that displays the amount of VAT that you are expected to pay to the Revenue and Customs (HMRC). A number of different items should be included in the VAT return, including:
The total amount of sales and purchases
The amount of VAT that you owe.
The amount of VAT you are eligible to claim
HMRC has issued you with a VAT refund.
When it comes to completing a VAT return, the laws might be extremely confusing. To learn more about VAT, you can consult the government's VAT guide, which is a comprehensive booklet that covers all you need to know about the tax and VAT returns in great detail. It's important to note that if you make a mistake on your VAT return, you could face significant fines (up to 15 percent for undeclared errors). Furthermore, even if you do not owe or claim any VAT, you are required to file a VAT return with the government.
Do I have till a certain date to complete my VAT return?
If you have a VAT period that lasts three months, you must submit your VAT return one month and seven days after the end of the VAT period (quarterly). This means that you'll have to complete four VAT returns per year, which is quite a burden. Your VAT online account should have precise information on the deadlines for filing your VAT returns and making your payment to HMRC (which are normally the same deadlines).
Methods of calculating the VAT return
Are you interested in learning how to compute a VAT return? It is possible to calculate your VAT return by comparing the difference between the VAT on purchases and the VAT on sales, unless your company is part of a flat rate scheme. Whether it's a positive or negative number, you'll have to pay that amount to HMRC; but, if it's a negative number, you'll get your money back. As a result, the formula is rather straightforward:
When you subtract VAT collected from VAT paid, you get a VAT refund (if it is negative) or a VAT payment (if positive)
In practise, here's how it works in the real world:
Make a note of the amount of VAT you paid on all purchases and costs that are relevant to your business.
Then compile a list of all the VAT you collected on VAT sales that you can refer to later.
Lastly, calculate your VAT liability using the VAT calculation to determine how much you owe.
What is the address where I must submit my VAT return?
In order to avoid penalties, VAT returns should be submitted to HMRC over the internet. If, on the other hand, your company is subject to an insolvency proceeding, you are unwilling to use computers for religious reasons, or your age, handicap, or geographic location prevents you from doing so, you can submit your VAT return via paper filing instead of electronically.
How to fill out a VAT return on the internet
Learning how to fill out a VAT return online is a reasonably straightforward process. First and foremost, you'll require a VAT number as well as a VAT online account. Then, using HMRC's free online service, you may simply submit your return to the government. To submit your VAT return immediately, you can also utilise commercial accounting software such as Xero or QuickBooks, which can be downloaded free of charge online. When submitting your VAT return through your online account, it is vital to note that you will not be allowed to use your online account if you have signed up for 'Making Tax Digital' for VAT. Alternative accounting software that is compatible with the programme will need to be used instead.
If you are an individual or a business in Pakistan that generates money, you are required to pay income tax as well as other direct taxes. To do so, you must first register as a taxpayer and obtain a National Tax Identification Number (NATN) (NTN).
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