How Often Should You Send Your HMRC VAT Returns?

Value added tax (VAT) is a consumption tax imposed on the value added to goods and services at each stage of production or distribution and sadly, it’s an unavoidable part of business.

It is also one of the primary reasons that small businesses fall into difficulties and look for help to repay their HMRC VAT arrears.

Every year, businesses registered for VAT must regularly send VAT returns to HMRC. The frequency of sending these returns can vary based on your business’s circumstances. There are various VAT return periods, so what’s the optimal frequency for submitting returns to HMRC?

Standard VAT return period

For most UK businesses, the standard VAT return period is quarterly. This means that VAT-registered businesses must forward VAT returns to HMRC every three months.

The quarters align with the calendar year, concluding on the final day of March, June, September, and December. For instance, if you follow the standard VAT return period, your VAT return deadlines are April 7th, July 7th, October 7th, and January 7th for their respective quarters.

This quarterly schedule serves as the default option for the majority of businesses, and aims to balance the need for consistent reporting with minimising the administrative burden associated with more frequent submissions. It allows businesses a reasonable period to compile financial data, compute the VAT owed, and make any necessary payments to HMRC.

Annual VAT return period

Certain small businesses in the UK may qualify for the annual VAT return period.

This option is open to businesses with an annual taxable turnover of less than £1.35 million. If eligible, you would only be required to submit a single VAT return annually. This can substantially reduce administrative workload for small businesses with limited resources.

The annual VAT return is typically due within two months and ten days following the conclusion of the annual accounting period.

This offers businesses the opportunity to report their VAT liabilities and payments annually, streamlining VAT compliance for those eligible for this scheme, which can make things much easier.

Monthly VAT return period

While quarterly reporting is standard for most businesses, some companies may opt for monthly VAT returns.

This might be an advisable option if your business engages in a high volume of transactions, has somewhat complex VAT obligations, or if your business needs to stay up to date with VAT liabilities on a more frequent basis.

Monthly returns can assist in effective cash flow management and help mitigate the risk of delayed payments or calculation errors in VAT.

To choose monthly VAT returns, you need to request this option from HMRC, and they will evaluate your eligibility based on your business’s specific circumstances.

Annual Accounting Scheme

In addition to the annual VAT return period mentioned earlier, there is also the Annual Accounting Scheme.

This scheme allows businesses to make advance payments toward their VAT liability at regular intervals: typically quarterly, monthly, or annually. At the end of the VAT year, a final return is submitted to reconcile the actual VAT liability with the payments made.

The Annual Accounting Scheme can aid businesses with predictable income and expenses in managing their VAT more efficiently, as it offers a degree of predictability regarding when VAT payments are due.

Determining the appropriate VAT return frequency

Selecting the most suitable VAT return frequency hinges on your business’s unique requirements and circumstances. Here are some factors to take into account when making this decision:

Business size:

Smaller businesses with limited resources may find the annual VAT return period advantageous, while larger businesses with more intricate transactions might prefer monthly or quarterly reporting.

Cash flow management:

Monthly returns can enhance cash flow management, although they entail more frequent administrative work.

Transaction complexity:

If your business deals with diverse VAT rates, exemptions, and complex transactions, more frequent reporting may be preferable to ensure precise VAT calculations.

Resources:

Assess the availability of resources, including accounting staff and software, when determining the frequency of your VAT returns.

Eligibility:

Verify that your business satisfies the eligibility criteria for any specific VAT return scheme you are considering, such as the Annual Accounting Scheme.

Is your business in need of help?

We’ve helped countless businesses to assess their options when they’ve found things difficult. By calling for free, no-obligation advice from one of our friendly specialists, you’ll be given all the guidance you need for the best route to take your business.

As business rescue specialists, we can help you to discover the best possible solution to any issues your company might be having. Call us on 0800 975 0380, or email [email protected] for a free consultation.