As a UK VAT registered company you are obligated to file a 'VAT return' every three months.
The https://online.hmrc.gov.uk/vat-file Web service from HM Revenue & Customs has improved slowly over the couple of years I've been using it. I've now signed up for Alerts, which tell me when a VAT return is due. Useful.
There is now even an option to see View submitted returns, though it always says "There are no returns previously submitted available to view." on my account.
Right now my procedure for submitting a VAT return goes something like this:
- Receive alert
- Swear to myself that are going to do it first thing this morning
- Get down to doing it a week before the due date
- Export my data as CSV from my Barclays bank business account
- Spend far too long putting it in the correct tables in the cash book in http://docs.google.com/
- Calculate VAT on the appropriate fields (only UK entries)
Then I load up the HMRC site and you get 9 boxes to fill in:
1) VAT due in this period on sales and other outputs
This is what you fill in if you charged VAT on a sale. For Webconverger this is only filled in for orders that originate in the United Kingdom.
2) VAT due in this period on acquisitions from other EC Member States
Since Webconverger deals in electronic goods, this field is always blank for the return.
3) Is automatically calculated (Sum of 1&2) 4) VAT reclaimed in this period on purchases and other inputs
This is the important one, since Webconverger is VAT registered. The items you spend VAT on in the UK, you claim back. For example Webconverger claims VAT back on:
- hardware purchases
- ISP costs
- Google adwords
And such and so forth. Once this is submitted, HMRC deposits this money back into Webconverger's bank account. Thanks very much.
This is calculated on the Gross amount from the CSV import with a formula like
(C15-(C15/1.175)). HOWEVER the VAT rate has been 15% in the UK between
01/12/2008 - 31/12/2009 so you need to carefully check the formula is right for
the particular date ranges. Otherwise you probably screwed up your return.
5) Net VAT to be paid to Customs or reclaimed by you (Difference between boxes 3 and 4) 6) Total value of sales and all other outputs excluding any VAT.
Once painstakingly importing values from your bank statement into your cash book, you now need to calculate the Net amounts of payments without VAT.
Thankfully most of Webconverger are not in the UK, so the gross amount is the net amount since I do not need to charge VAT for orders outside the UK.
7) Total value of purchases and all other inputs excluding any VAT.
This is calculated in a spreadsheet with a formula like
Subtracting VAT (make sure you the correct value) from the Gross amount to get
the Net amount (excluding VAT).
8) Total value of all supplies of goods and related costs, excluding any VAT, to other EC member states 9) Total value of acquisitions of goods and related costs excluding any VAT, from other EC member states
I leave this blank, since software supplied over the Internet is not regarded as a "good".
Several ways to screw up the VAT return
I assumed that the form somehow took all your UK (& outside UK) gross sales and calculated the VAT reclaim value for you for that particular period. For some bizarre reason YOU need to calculate this value manually and screw it up in a variety of ways. WHY HMRC? WHY?
- Getting the tax rate wrong (i.e. copy the wrong tax formula)
- Submitting Gross values (with VAT) instead of Net values (ex VAT)
- Accidentally filling in box 1 or 8/9 if you're a software company like Webconverger
If you fill in 8/9, you are then obligated to fill in ECSL returns. You don't want to go there.
You could avoid all this hassle entirely if you are not VAT registered. However I think being VAT registered has a couple of advantages:
- You can reclaim your VAT, which is important if you make a lot of local purchases and you do much more sales outside the UK
- You can zero rate EU vat easier since companies in the EU expect you to be VAT registered, however since software is an electronic product EU companies should not need a EU VAT number. Unfortunately there seems to be a lot of confusion here.
I want to see a system where my bank transactions are fed directly into the HMRC, so I don't have to worry about this. Currently exporting data from Barclays is a very manual task and then you need to sort out which transactions are UK based and which aren't. If Barclays had some extra meta data (TAX data, origin of payment/receipt) to their CSV exports, it would save a lot of time and money. If there was a standard CSV data interchange format, so I didn't have to convert the CSV into some braindead XML HMRC format, that would be even better.
Again the https://online.hmrc.gov.uk/vat-file can be improved to easily amend recent returns.