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) 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.
On this page:
- Who has to switch to online VAT Returns?
- Finding out if this affects you
- How HMRC calculates your annual turnover
- If your turnover is less than £100,000
- Exemptions from doing your VAT online and paying VAT electronically
- What to do if you disagree with HMRC's decision
- Submitting your VAT Return Online
- 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.
Finding out if this affects you
If your annual turnover was £100,000 or more on 31 December 2009, HMRC will send you a letter in February 2010. This letter will explain 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 will be a guide with the letter, which explains how you take the first step - registering and enrolling for VAT Online services.
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 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.
If your turnover is less than £100,000
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.
However, you should note that it's likely that all VAT-registered businesses will have to file their returns online and pay electronically by 2012, at the latest. So, 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
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 either of the following applies:
- you're subject to an insolvency procedure - but if you're subject to an approved Voluntary Arrangement you may file online if you want to
- HMRC is satisfied that your business is run entirely by practising members of a religious society, whose beliefs prevent them from using computers
If neither of the above applies, you must submit your VAT Return online and pay your VAT electronically. You must do this even if:
- you don't own or have access to a computer with links to the internet
- you lack computer skills
- you disagree in principle with compulsory online filing
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.
What to do if you disagree with HMRC's decision
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.
Read more about what to do if you disagree with an HMRC decision
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 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
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:
- 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 online service.)
- Talk to your accountant if they will be submitting your VAT Return online on your behalf and discuss what you both need to do, to ensure you meet the deadline for your first online return.
- Consider whether you need to change any of your business processes for checking and signing off your VAT Return.
- Identify your preferred form of electronic payment (eg Direct Debit, internet banking, etc) and set up the necessary arrangements. There are lots of electronic payment methods to choose from.
- If your business has to pay your VAT by cheque, make sure you order from HMRC the necessary Bank Giro paying-in slips (preprinted with your and HMRC details), which you will use when paying in your cheque at a participating bank or building society. For more information on how to order the paying-in slips see the link below ‘Read more about ordering Bank Giro paying-in slips'.
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 - including electronically
Read more about ordering Bank Giro paying-in slips
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
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 175K)
Beginner's guide to completing your VAT Return online (PDF 164K)
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.
