Glossary · UK
What is VAT Return?
The periodic report a VAT-registered business submits to HMRC, usually every three months, declaring the VAT charged on sales and the VAT reclaimed on purchases, and paying or reclaiming the difference.
Full Definition
A VAT return is the regular submission a VAT-registered business must make to HMRC, most commonly every three months (a VAT quarter), reporting the total output VAT charged on its sales and the total input VAT it has paid on its own purchases and expenses during the period. If output VAT exceeds input VAT, the business pays the difference to HMRC; if input VAT exceeds output VAT -- which can happen for businesses with large capital purchases, or those selling mostly zero-rated goods while still incurring standard-rated costs -- HMRC refunds the difference. Since April 2022, all VAT-registered businesses must keep digital records and submit VAT returns using Making Tax Digital compatible software as part of the wider Making Tax Digital programme, with paper and manual online portal submissions no longer accepted for the vast majority of businesses. Businesses using the VAT Flat Rate Scheme, VAT Cash Accounting Scheme or VAT Annual Accounting Scheme complete their VAT return using modified rules specific to that scheme, but all VAT-registered businesses, regardless of scheme, must submit a return for every period even if there is no VAT to pay or reclaim, known as a nil return, and late submission triggers HMRC's points-based penalty system.