VAT return due soon? Avoid these common mistakes

For VAT-registered businesses, submission of VAT returns can often feel like just another piece of unnecessary red tape. But small errors in your return can quickly lead to HMRC penalties and interest, unwanted queries, or even a time-consuming VAT inspection. With deadlines approaching, it’s worth taking a moment to check your processes and avoid the most common pitfalls.

Mixing up dates and periods

One of the easiest mistakes to make is submitting figures for the wrong period. For example, including sales or purchases from just outside the quarter. Always double-check that the data you’re pulling from your accounting software matches the dates covered by your VAT return.

Claiming VAT on non-eligible expenses

Not every business cost is VAT-recoverable. HMRC rules are strict when it comes to areas including but not limited to client entertainment, personal expenses, or purchases without a valid VAT invoice. Double-check receipts and only claim where VAT is clearly itemised and allowable. Even where VAT is clearly identified on an invoice, this does not necessarily mean it can be reclaimed if it is for a disallowable purpose, please seek advice.

Errors with partial exemption and mixed use

If your business makes both VATable and exempt supplies, you may need to apply partial exemption rules. Similarly, assets or costs with both business and personal use (such as vehicles, fuel, or phones) need careful treatment. Incorrectly reclaiming full VAT could flag up compliance risks.

Forgetting digital record-keeping rules

Making Tax Digital (MTD) requires VAT returns to be filed digitally, with accurate digital records and links. Manually re-typing figures into spreadsheets is no longer allowed. If your systems aren’t fully compliant, you could face penalties and additional HMRC scrutiny.

Missing the deadline

VAT returns (whether you complete these monthly or quarterly) and payments are due one month and seven days after the end of your VAT period. Even if your return is correct, a late submission or late payment can trigger automatic penalties and interest. Setting up reminders or direct debits can help you stay on track.

How to stay compliant

The best way to avoid VAT mistakes is to have clear systems in place, reconcile your accounts regularly, and review your returns carefully before filing. Many businesses also benefit from outsourcing VAT compliance to accountants who understand the latest HMRC requirements, particularly in relation to whether input VAT can be reclaimed, and can spot issues before they become costly.