VAT Returns

A VAT return is a report submitted to HMRC showing how much VAT your business has charged on sales and paid on purchases. If you're VAT-registered, you must file returns—usually every three months—using approved software. You’ll either pay the difference to HMRC or reclaim it if you've paid more VAT than you’ve collected.

Currently you are required to register for VAT if your total taxable turnover is more than £90,000 within a 12 month period. To deregister from VAT registration your total taxable turnover must be less than £88,000.

There are various VAT Schemes in operation which are detailed below.

Standard VAT Accounting

You charge VAT on sales and reclaim VAT on purchases based on the issue date of invoices. Returns are filed quarterly, showing the actual figures. Suitable for most businesses.

Cash Accounting Scheme

You only pay VAT when your customers pay you and reclaim VAT when you pay your suppliers. Helps with cash flow. Available if your turnover is under £1.35 million.

Flat Rate Scheme

You pay a fixed percentage of your turnover to HMRC and cannot reclaim VAT on most purchases (except capital assets over £2,000). Designed to simplify VAT for small businesses with a turnover under £150,000 (excluding VAT).

Annual Accounting Scheme

You file one VAT return per year and make advance payments throughout the year. Ideal for businesses that want to reduce admin. Available if turnover is under £1.35 million.

Partial Exemption Scheme

For businesses that make both VATable and VAT-exempt sales (e.g. some charities, landlords, and finance companies). You can only reclaim VAT on purchases related to taxable sales. A calculation is done to work out how much VAT can be reclaimed. This scheme ensures only the correct proportion of input VAT is claimed back.

Margin Scheme

Used when you sell second-hand goods, antiques, art, or collectibles. VAT is paid only on the difference between purchase and sale price, not the full sale price. This prevents double taxation on second-hand items.

Retail Schemes

Designed for retailers who make lots of small sales to the public and can't issue VAT invoices for each transaction. Instead of recording VAT on every sale, you apply a standard method to calculate VAT due.

Point of Sale Scheme – Uses actual VAT charged at the till.
Apportionment Scheme – Applies percentages to different categories of sales.
Direct Calculation Scheme – Based on cost prices and markups.

Tour Operators’ Margin Scheme (TOMS)

For businesses that buy in and re-sell travel services (like hotels or tours) as a package. VAT is calculated on the margin rather than the full value.