In this section:
- Moving from paper to online VAT Returns and paying electronically
- How to sign up to use VAT online services
- How to submit your VAT Return online
- Go direct to HMRC Online Services
Moving from paper to online VAT Returns and paying electronically
HM Revenue & Customs (HMRC) plans to phase 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).
This guide explains who is affected and when, what action you should take now, and what you can expect. It also tells you where you can get more information and advice.
On this page:
- Who has to switch to online VAT Returns?
- If your turnover is less than £100,000
- Submitting your VAT Return Online
- Finding out if this affects you
- How HMRC calculates your annual turnover
- Getting ready for changes
- Help and support
Who has to switch to online VAT Returns?
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:
- you have an annual turnover of £100,000 or more (exclusive of VAT)
- you register or should have registered for VAT on or after 1 April 2010 (regardless of your turnover)
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.
Exemptions from doing your VAT online and paying VAT electronically
You won't have to submit your VAT Return online or pay your VAT electronically if HMRC is satisfied that your business is run entirely by individuals who have a religious conscience objection to using computers.
If your turnover is less than £100,000
You won't have to submit your VAT Return online and pay VAT electronically if you registered for VAT before April 2010 and your turnover stays below £100,000. You will still be able to submit your VAT Return on paper but this may change in 2012.
You might want to switch to using the online service sooner - 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
Submitting your VAT Return online
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 even 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
Finding out if this affects you
If you do have to submit your VAT Returns online and pay your VAT electronically HMRC will send you a letter in February 2010 telling you this.
If you want to appeal against HMRC's decision, you should wait until you receive this letter before doing so.
How HMRC calculates your annual turnover
Your annual turnover will be calculated on any 12 month period ending on or after 31 December 2009. HMRC will look 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 will be 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 will be 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 will be included in the calculation and you will have to file online and pay electronically.
If you've not submitted a full set of returns in the last year
HMRC will 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 3 and multiplied by 4.
But if you're due to submit a return for the VAT period ended 31 December 2009 and this is not yet available, HMRC will use the information on the 31 December 2008 return instead.
If you've not submitted any returns in the last year
HMRC will use the turnover estimate you gave when you registered for VAT but will update this estimate with any additional information they hold.
Revisiting the figures used to calculate your turnover
The method HMRC uses 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 and if errors on your VAT Returns are found later - 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 their figures if you can demonstrate that they were not fair and reasonable. HMRC will judge each case on its own merits. HMRC are unlikely to agree a new calculation unless the difference is very large. HMRC's view is that differences of less than 30 per cent will not normally justify a recalculation.
Find out what to do if you don't agree with an HMRC decision
Getting ready for the changes
If you think you will have to submit your VAT Return online from 1 April 2010, you should take the following action now:
- Identify your preferred form of electronic payment (eg Direct Debit, Internet banking) and set up the necessary arrangements.
- Register and enrol for the VAT online service. (You will need to do this to submit your VAT Return online, whether you choose to use commercial software or HMRC's free software.)
- Talk to your accountant if they will be submitting your VAT Return online on your behalf and discuss what you both need to do.
- Consider whether you need to change any of your business processes for checking and signing off your VAT Return.
Find out about the different ways to pay your VAT - including electronically
Find out how to sign up to use the VAT online services
Read more about using an accountant to submit your Returns online
Help and support
The HMRC 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.
