How to submit online VAT returns

14 June 2010
How to submit online VAT returns

It is no longer acceptable for businesses with an annual turnover of more than £100,000 to submit VAT returns by paper. Chris Lane, a partner at accountancy firm Kingston Smith, explains the new rules on filing VAT returns online.


I own a small restaurant in the south of England. I've heard that businesses must now submit their VAT returns online rather than using the old paper-based system. Is this correct?


From April 2010, all businesses with an annual turnover of more than £100,000 (exclusive of VAT) or which have registered for VAT on or after April 2010 will have to submit their quarterly VAT returns online rather than using the traditional paper-based system.

With electronic filing of VAT returns for all businesses expected to become mandatory by 2012, smaller businesses with an annual turnover of less than £100,000 are also being encouraged to use the online system. Moreover, any VAT liabilities will have to be paid electronically - by direct debit or telephone/internet banking - instead of using a cheque.


All businesses required to file their VAT returns online will need to do so irrespective of whether they have a computer with internet access or the skills to use it. If you currently use an accountant to complete your VAT returns, they can do this online on your behalf. Virtually the only exception is for people whose religious beliefs preclude the use of computer equipment, in which case appropriate evidence will be required.

To register for online filing you need to go to HM Revenue & Customs' (HMRC) VAT registration page at:

First, you will need to prove the identity of your business. Once you have completed the information boxes on the web page you will be given a user ID. This is a unique reference number for your business, which you will need - along with an activation code - in order to log in.

You should receive your activation code within a week of registering, enabling you to log in and start filing your VAT returns online. Your activation code will expire after 28 days so activate your account as soon as you receive your code to avoid having to go through the enrolment process again.

If you are already registered with HMRC's online service for, perhaps, self assessment or PAYE online, it will be a slightly easier process to add the VAT service to your options. However, you will still need to prove the identity of your business.


The five pieces of information you will need to prove the identity of your business are:

â- The postcode of your principal place of business (if your business is based overseas, use the postcode shown on your VAT4 Certificate of Registration)
â- Your effective date of registration for VAT
â- The final month of the last VAT return you submitted
â- The "Box 5" figure from the last VAT return you submitted


To deter businesses from settling their VAT liabilities using cheques, HMRC has announced that all cheque payments posted to HMRC will be treated as received on the date the cheque clears. This means if you are posting a cheque to HMRC, you should allow enough time for the post to arrive and for the cheque to clear to avoid the risk of a late payment penalty.

With businesses now relying on HMRC's efficiency to bank their cheques promptly, electronic payment methods are likely to look much more attractive. Most businesses have an extra seven days after the payment due date to pay their VAT electronically, while those paying by cheque will have to submit it a week before the due date.


Chris Lane, Partner, Kingston Smith LLP

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