As a business that is registered for VAT, you effectively act as a tax collector for HMRC. The idea is that the VAT you pay, and the VAT you charge, roughly levels out. When it doesn’t you’ll have to settle the balance with HMRC or receive a tax refund. That’s what your VAT return is for.

Responsibilities of a VAT registered business

  • Pay VAT on the items and services you buy from other businesses
  • Charge VAT on the items or services you sell to other businesses and customers
  • Submit a VAT return (usually on a quarterly basis)
  • Pay any VAT over to HMRC

Submitting the Return

As a small business you must register to pay VAT as soon as your income exceeds the VAT threshold for any 12 month period. Once you are VAT registered you must submit a VAT return even if you have no VAT to pay or reclaim. Your VAT returns must be submitted to HMRC usually every 3 months. This period is known as your accounting period. If you fail to submit your VAT return by the deadline, HMRC will record a default and you may have to pay a surcharge.

Your VAT return should record details for the period such as:

  • How much you’ve sold and purchase
  • What VAT do you owe
  • How much you can reclaim
  • Total amount of VAT refund

To be able to produce an accurate VAT return, you will need to keep records of all VAT transactions. That includes the VAT your business has charged clients, and the VAT the business has been charged on purchases. HMRC can charge you a penalty of £400 if you submit a paper return, so unless HMRC has told you you’re exempt, you must submit your return online.


  • You’ll need to pay your VAT bill by the deadline shown on your VAT return (there are different deadlines if you use the annual accounting scheme or make payments on account)
  • Your VAT return will show your net output tax and net input tax
  • If output tax is higher than input tax i.e. you’ve paid more VAT than you’ve received on sales, you’ll receive a VAT refund from HMRC. If input tax is higher than output tax you’ll have to make a payment to HMRC
  • Payments should be made to HMRC via your HMRC online account
  • You must make sure your payment reaches HMRC’s bank account by the deadline or you risk a surcharge.
  • You can use the VAT payment deadline calculator to work out how long it’ll take to pay

Payments can be made by online or telephone banking, direct debit, BACS, standing order, by debit card or credit card, by CHAPS, or at your bank or building society. Here are HMRC’s VAT payment details. For confidential advice on other payment issues with corporation tax, or late payment of PAYE contact us at your earliest convenience.