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HM Revenue & Customs (HMRC) is phasing out paper VAT returns. From April 2010 you may have to submit your VAT returns online and pay any VAT due electronically (for example by Direct Debit, internet or phone banking etc). If you are affected by this, there are things you need to do now.
This guide explains who is affected, what action you should take and when. It also tells you where you can get more information and advice.
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From 1 April 2010 you will have to submit your VAT returns online and pay any VAT due electronically if either of the following applies:
If you fall into either of the groups mentioned above, you will have to file all your VAT returns online (including nil and repayment returns) even if your turnover drops below £100,000 in the future.
If your annual turnover was £100,000 or more on 31 December 2009, HMRC sent you a letter in February 2010. This letter explained that you have to submit your VAT Returns online and pay your VAT electronically for all returns starting on or after 1 April 2010. There was a guide with the letter, which explains how you take the first step - registering and enrolling for VAT Online services.
Your annual turnover will be calculated on any 12-month period ending on or after 31 December 2009. HMRC looked initially at the VAT Returns you have submitted for VAT periods covering the 12 months ending on 31 December 2009. The amounts you have entered in box 6 of these returns was added together, as this shows your total turnover excluding VAT.
If you use the Flat Rate Scheme, your box 6 figures will include VAT, but the turnover calculation is adjusted to make sure that this VAT is not included.
If your turnover is £100,000 or more because you have made a one-off large sale, or one of your VAT accounting periods has an exceptionally high turnover, this is included in the calculation and you will have to file online and pay electronically.
HMRC use the box 6 figures from the returns that are available to calculate your annual turnover. For example, if you normally submit quarterly returns and one is missing, the three available returns will be used and the total of the box 6 figures will be divided by three and multiplied by four.
HMRC use the turnover estimate you gave when you registered for VAT but will update this estimate with any additional information they hold.
The method HMRC use to calculate your turnover is based on figures you have provided and is designed to give a fair and reasonable result.
The calculation does not have to be based on strictly accurate return figures. If any errors are found later on your VAT returns or you supply missing returns which would have reduced the original calculation this will not change the calculation. You will still have to submit your return online and pay electronically on the basis of HMRC's original calculation of turnover.
HMRC will, however, revisit any estimated figures if you can demonstrate that they were not fair and reasonable. HMRC will judge each case on its own merits.
You currently don't have to submit your VAT Return online and pay VAT electronically if you registered for VAT before 1 April 2010 and your turnover stays below £100,000.
Even if you don’t have to submit online returns and pay electronically, you might want to switch to using the online service as it will save you time and, in most cases, will give you extra days to submit your return and pay the VAT due.
Find out how to sign up to use the VAT online services
You won't have to submit your VAT Return online or pay your VAT electronically if either of the following applies:
If neither of the above applies, you must submit your VAT Return online and pay your VAT electronically. You must do this even if:
If you are in this position, or if you find the thought of filing online a bit daunting, please see the 'Help and support' section below.
If you have received a letter from HMRC telling you that you must submit your VAT Return online and you don't agree with HMRC's decision, you can either ask HMRC to review the decision, or you can appeal to an independent tribunal. If you think you shouldn't have to submit your VAT returns online because you are exempt, or your turnover is less than £100,000, you will need to provide evidence.
Any request for a review by HMRC or an appeal to a tribunal, should be made within 30 days of the date of the letter telling you that you must submit your VAT Return online.
If you choose to have a review by HMRC and are dissatisfied with the
outcome and want to take matters further, you must appeal to a tribunal,
within 30 days of the date of the letter notifying you of HMRC’s
decision.
Read more about what to do if you disagree with an HMRC decision
The online VAT Return is very similar to the paper version and there has been no change to the rules on how you complete your return or how you calculate VAT.
Also, you won't have to change your existing record keeping system - you can still keep your records on paper if you prefer.
Signing up to do your VAT online is straightforward and you don't have to be a computer expert to be able to file your VAT Return online.
You don't need to have the latest hi-tech computer or have broadband. VAT online services are designed to work well with a dial-up connection.
Find out how to sign up to use the VAT online services
Read more about how to submit your VAT Return online
Read more about electronic and paper VAT records
If you think you will have to submit your VAT Return online from 1 April 2010, you should take the following action now:
You might also want to set up the email reminder service - this is a free service which reminds you when your next online VAT Return is due. You set this up by filling in your email address on the 'At a glance' screen, once you have registered and enrolled for the VAT online service.
Find out about the different ways to pay your VAT - electronically
Find out how to sign up to use the VAT online services
Read more about using an accountant to submit your returns online
You can get help with using HMRC's VAT online services in the following guides, which are available online, and which can also be printed out.
Beginner's guide to signing up to use the VAT online service (PDF 106K)
Beginner's guide to completing your VAT Return online (PDF 85K)
There is also an online demonstrator, which takes you through the various screens involved in registering and enrolling for VAT Online, submitting a return, and setting up an online Direct Debit.
HMRC's Online Customer Adviser Team is delivering a series of events for small and medium-sized businesses covering VAT Online and the implications of these changes.
Read more about the Online Customer Adviser Team events
Read more about Business Advice Open Days
You can also get help over the telephone.
