How the VAT return calculates

If your business is VAT registered, you must produce VAT Return for HMRC. We automatically calculate VAT due depending on your VAT scheme and the rates you choose when entering your transactions. Check the section below for your VAT scheme to see the actual calculations used for each value on the VAT Return.

For more information about how to create a VAT Return, please see our Create a VAT Return article.

Things to consider

No matter which VAT scheme you use, the date of your transactions determines when they will appear on your VAT return. To avoid errors, always enter transactions with the correct dates.

If you enter a transaction after the VAT period it relates to has ended, when you run your next VAT return we'll prompt you to include any late transactions on this VAT Return.

Standard VAT

If you use the Standard VAT scheme, the VAT Return calculates from the VAT element of your

  • Invoices and credit notes.
  • Other money in and money out entered through the Banking option.
  • Journals entered to the relevant VAT categories.

How the VAT Return calculates

Box 1

The total VAT due this period on sales – This includes the VAT element of:

  • Sales invoices
  • Sales credit notes – Credit notes are deducted from the value in this box
  • Money paid in to the bank with VAT.
  • Journals entered to the VAT on Sales
  • Any purchases made using Reverse charge VAT
  • VAT on imports accounted through postponed accounting
Box 2

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the VAT due (but not paid) on all goods and related services you bought in this period from EU Member States.

Box 3 The total VAT due – This is the sum of box 1 and 2.
Box 4

The total VAT reclaimed this period on purchases – This includes the VAT element of

  • Money paid out of the bank account that includes VAT.
  • Journals entered to the VAT on Purchases.
  • Any purchases made using Reverse charge VAT
Box 5 The net VAT due to HMRC or reclaimable by you – This is the difference between boxes 3 and 4.
Box 6

Total net value of your sales, excluding VAT.

This includes the purchases of services from EU suppliers and suppliers outside of the EU where reverse charge applies.
Box 7 Total net value of purchases, excluding VAT.
Box 8

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the total value of sales of goods to VAT registered EU customers, excluding VAT.
Box 9

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the total value of purchases of goods from VAT registered EU suppliers, excluding VAT.

The VAT treatment is automatically worked out for you based on the customer or supplier’s country, VAT number and whether the invoice is for goods or services.

EU trade under the Northern Ireland protocol only

Boxes 8 and 9 record sales and purchases for businesses in Northern Ireland that trade with an EU Member State under the Northern Ireland protocol. Related costs such as freight and insurance where these form part of the invoice or contract price should exclude VAT.

VAT Cash Accounting

On the Cash Accounting Scheme

  • You pay VAT when you receive payment from a customer.

  • You reclaim VAT once you pay for your purchases.

The VAT Return calculates from the VAT element of your customer receipts, payments to suppliers, refunds, other payments or receipts that include VAT, and any journals that include VAT.

The VAT amount on outstanding invoices and credit notes records to a special VAT holding until the invoice or credit note is paid. When this happens, we move the VAT amount to the VAT on Sales categories. The VAT rate used on a customer receipt is always matches as the invoice being paid.

If you buy or sell goods and services to a VAT registered customer or supplier outside the UK, VAT is calculated at the point of invoice, not at the point of payment. For further information, please refer to HMRC VAT Notice 731.

How the VAT Return calculates

Box 1

The total VAT due this period on sales – This includes the VAT element of

  • Customer receipts

  • Customer refunds – Refunds are deducted from the value in this box

  • Money in transactions ta hat include VAT

  • Journals entered to the VAT on Sales .

If you’ve purchased standard rated or lower services from an EU supplier, the reverse charge VAT is also included.
Box 2

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the VAT due (but not paid) on all goods and related services you acquired in this period from EU Member States.

Box 3 The total VAT due – This is the sum of box 1 and 2.
Box 4

The total VAT reclaimed this period on purchases – This includes the VAT element of:

  • Money out transactions that include VAT

  • Journals entered to the VAT on Purchases.

  • Notional VAT value in box 2 for EU purchases and the reverse charge VAT from box 1 for the purchase of standard rated services from an EU supplier.
Box 5 The net VAT to be paid to HMRC or to be reclaimed by you – This is the difference between boxes 3 and 4.
Box 6

The total value of sales, excluding VAT.

Tip: This also includes the purchases of services from EU suppliers and suppliers outside of the EU where reverse charge applies.
Box 7 The total value of purchases, excluding VAT.
Box 8

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the total value of sales of goods to VAT registered EU customers, excluding VAT.
Box 9

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the total value of purchases of goods from VAT registered EU suppliers, excluding VAT.

The VAT treatment is automatically worked out for you based on the customer or supplier’s country, VAT number and whether the invoice is for goods or services.

 

Flat Rate VAT

We calculate the VAT based on your Flat Rate percentage. This is percentage you entered when setting up your VAT scheme. You can check in Settings, Business Settings and then Accounting Dates & VAT.

HMRC will define your flat rate percentage and will notify you of any changes.

On this scheme you can choose either:

  • Invoice based. You pay VAT when you receive invoices similar to standard VAT scheme.

  • Cash based. You pay VAT when you pay your invoices, similar to the cash accounting scheme.

We calculate the VAT as normal at the standard, lower or zero rate. When you calculate your VAT Return, we adjust the VAT due using your flat rate percentage.

How the VAT Return calculates

Box 1

The total VAT due this period on sales. This includes

  • The turnover value from box 6 multiplied by the flat rate percentage.

  • VAT from the sale of capital assets for which you’ve reclaimed VAT outside of the flat rate scheme.
Box 2

Only applicable to goods moved under the Northern Ireland protocol.

If your business is based in Northern Ireland, shows the VAT due (but not paid) on all goods and related services you acquired in this period from EU Member States.
Box 3 The total VAT due – This is the sum of box 1 and 2.
Box 4 VAT reclaimed this period on purchase of a capital asset outside of the flat rate scheme.

It also includes the notional VAT value in box 2 for EU purchases and the reverse charge VAT from box 1 for the purchase of standard rated services from an EU supplier.
Box 5 The net VAT to be paid to HMRC or to be reclaimed by you – This is the difference between boxes 3 and 4.
Box 6

This value includes:

  • The turnover value of sales, including VAT – This is the value used in the flat rate percentage calculation and includes sales outside of the EU.

  • The net value of the sale of capital assets outside of the flat rate scheme.

  • The sale of services to EU customers and supplies outside the scope of VAT.
Box 7 This value includes:

The net value of the purchase of capital assets outside of the flat rate scheme.
The total value of purchases of goods and services.
Box 8

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the total value of sales of goods to VAT registered EU customers, excluding VAT.
Box 9

Only applicable to goods moved under the Northern Ireland protocol.

For Northern Ireland businesses, this shows the total value of purchases of goods from VAT registered EU suppliers, excluding VAT.