VAT return
A VAT return reports the VAT charged on sales and reclaimed on purchases for a period, usually quarterly. It is filed through Making Tax Digital software, and both the return and the payment are due one calendar month and seven days after the period ends.
How it works
The return itself is nine boxes: output VAT on sales, input VAT on purchases, the net position, and the values behind them. Where output exceeds input you pay HMRC; where input is larger, for example in a zero-rated business, HMRC repays you.
Filing must go through compatible software with digital links back to the underlying records. Most businesses file quarterly, but monthly returns suit repayment businesses and the annual accounting scheme suits those wanting one return and instalments. Both the return and the payment are due one calendar month and seven days after the period end, and direct debit collection is a further three working days later.
Penalties are points-based. Each late return earns a point, and once you reach the threshold for your filing frequency a £200 penalty applies, with a further £200 for every subsequent late return. Late payment penalties are separate, starting once payment is more than fifteen days late and rising at thirty days, with interest running throughout.
Accuracy matters as much as timing. Common adjustments include partial exemption, fuel scale charges, the reverse charge on construction or overseas services, and correcting earlier errors — small ones through the next return, larger ones by separate disclosure.
Who this affects
- Every VAT-registered company, whatever its turnover
- Repayment businesses that may benefit from monthly returns
- Construction businesses applying the domestic reverse charge
- Companies buying services from overseas suppliers
Common mistakes
- Reclaiming VAT without a valid VAT invoice
- Missing the reverse charge on overseas services or construction work
- Reclaiming VAT on client entertaining or on a car available for private use
- Filing on time but paying late, which is a separate penalty
Frequently asked questions
When is a VAT return due?
One calendar month and seven days after the end of the VAT period, with payment due by the same date unless you pay by direct debit.
How do I file a VAT return?
Through Making Tax Digital compatible software with digital links to your records. Manual entry on the HMRC portal is no longer available for most businesses.
What is the penalty for a late VAT return?
A point for each late submission, then a £200 penalty once you reach the threshold for your filing frequency, and £200 for each late return after that.
Can I correct a mistake on a previous return?
Small errors within the limits can be adjusted on the next return. Larger errors must be disclosed to HMRC separately.
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Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
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