VAT Return
A periodic report that VAT-registered businesses must submit to HMRC, typically quarterly, showing the VAT they have charged customers and the VAT they have paid on purchases. The difference between output tax (VAT charged) and input tax (VAT reclaimed) determines whether the business owes money to HMRC or is due a refund. Returns must be submitted and payment made through HMRC's Making Tax Digital platform.
How it works
Most VAT-registered businesses file a return every quarter, though some are on monthly or annual schemes depending on their circumstances, and each return covers a specific accounting period rather than the tax year. The return totals up all the output tax charged on sales and all the input tax reclaimed on purchases during that period, then works out the net figure owed to or due from HMRC.
Returns and payments must go through HMRC's Making Tax Digital system, which requires digital record-keeping and submission via compatible software rather than manual entry on HMRC's website — a business using spreadsheets typically needs bridging software to connect its records to the MTD system. Payment is normally due at the same time as the return, usually one calendar month and seven days after the end of the VAT period.
If input tax exceeds output tax in a period, for example because a business made a large capital purchase, the return shows a repayment due from HMRC rather than a bill, and HMRC typically refunds this once the return is processed and any checks are complete. Persistent repayment positions can sometimes trigger closer HMRC scrutiny, so businesses in this situation should keep especially clear records of input VAT claims.
Frequently asked questions
How often do I need to submit a VAT return?
Most businesses file quarterly, but HMRC also allows monthly returns, often chosen by businesses that regularly reclaim VAT, and an annual accounting scheme with interim payments, so the frequency depends on which scheme you're registered under.
What happens if my input tax is higher than my output tax on a return?
You're due a repayment from HMRC rather than owing money — this commonly happens after a large purchase of stock or equipment, and HMRC pays the refund once the return has been processed and any checks completed.
Do I have to use software to file a VAT return?
Yes — Making Tax Digital requires VAT returns to be submitted using compatible software with digital records, so manual entry directly into an HMRC web form is no longer an option for VAT-registered businesses.
Related Terms
Value Added Tax
A consumption tax charged at each stage of production and distribution on goods and services, with the final burden falling on the end consumer.
VAT Registration Threshold
The level of taxable turnover above which businesses must register for VAT, currently £90,000 per rolling 12-month period.
Standard Rate VAT
The main VAT rate of 20% applied to most goods and services sold in the UK by VAT-registered businesses.
Flat Rate Scheme
A simplified VAT accounting method for small businesses with an annual turnover below £150,000, where you pay a fixed percentage of your gross turnover to HMRC instead of accounting for input and output VAT separately.
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