CAT / FIA FTX Syllabus F. Value Added Tax - Understand how VAT is accounted for and administered - Notes ^{5 / 7}

Quarterly accounting for VAT and electronic filing

1. On registration, the trader must charge VAT on all taxable supplies (output VAT).

2. The trader can also reclaim VAT on all taxable supplies purchased (input VAT).

3. At the end of a 3-month period, the trader accounts to HMRC for all the output tax less the input tax on their VAT return.

4. VAT is accounted for quarterly.

5. VAT registered businesses must file their returns and make payments online.

6. The deadline for submitting the VAT return and making payments electronically is 1 month and 7 days after the period has ended. 

   Therefore, for the period ending 31/03/2025, the return with payment can be submitted electronically on 07/05/2025.

Illustration 1

Cow Ltd's sales (standard rated) for the first 3 months were:

January 2025 - £30,000

February 2025 - £30,000

March 2025 - £40,000

How, and when, will Cow Ltd have to submit its quarterly VAT return and pay any related VAT liability?

• Solution

  Cow Ltd will have to file its VAT returns online and pay the VAT which is due electronically.

  The deadline for filling the VAT return and paying any VAT is one months and seven days after the end of each quarter.

  So, in our case, Cow Ltd will pay (30,000 + 30,000 + 40,000) x 20% = £20,000 VAT on 7 May 2025 for the quarter ended 31 March 2025.

Illustration 2

For the quarter ended 30/06/2024, Pooja Ltd. had output vat of £10,000 and input VAT of £7,000.

When will the company be required to file and pay the VAT liability and how much is it?

Solution:

Output VAT £10,000
Input VAT (£7,000)
Net VAT payable £3,000

• Pooja Ltd. must file the return and make the payment online on 07/08/2024.

Other points

1. Because VAT is a self-assessed tax, HMRC make control visits to VAT registered traders. 

   The purpose of a control visit is to provide an opportunity for HMRC to check the accuracy of VAT returns.

2. A business may choose to submit monthly returns but would only do so if it received regular VAT repayments. 

   This would arise where the business had standard rated purchases and expenses but made zero rated sales and hence always had more input tax than output tax and would claim a repayment.

3. If a trader’s VAT liability exceeds £2,300,000 over a 12-month period, they must make monthly payments on account of the VAT liability.