VAT return

What it means

A VAT return is the monthly or quarterly reckoning of output tax against input tax deducted. The result is either VAT payable or an excess deduction to be refunded.

It shares only the word with the income tax return. It is filed far more often, it is not tied to the annual accounts, and it is built from the documents of the period rather than from profit or loss.

Output tax in the return is not only tax on your own sales. It also covers tax the payer owes as a customer: on services and goods bought from the EU, or under the domestic reverse charge, it is declared by self-assessment and normally deducted in the same return.

How it works in practice

The deadline is 25 days after the end of the tax period, and the tax falls due within the same window. The control statement goes with the return, and supplies to the EU add the recapitulative statement.

Filing is electronic, through the Financial Administration portal. A mistake in a filed return is corrected by a corrective return while the deadline still runs and by a supplementary return once it has passed; figures cannot be patched in a later month, even though the software will let you.

Before filing we compare the figures in the return with the control statement and with the balance of the VAT account in the trial balance. If they disagree we look for the error that same day - a misplaced document shows up in the counterparty’s control statement too, and the office will get in touch on its own.

What to watch out for

The return is filed even for a period with not a single transaction. A missing nil return carries the same penalty as a missing return with tax due, and repeated misses worsen the tax reliability index.

An excess deduction is not refunded automatically. The tax office may examine it in a tax audit before paying it out, and for as long as that lasts the company is short of the money. Anyone counting on a quick VAT refund after a large investment should have its documents ready at filing and financing in place for several months.