How to fill in a VAT return from the books

A VAT return is a summary of one VAT period. It has nine boxes, and they are the same for every business. Each box is a total of figures already in the books.

Boxes 1 to 5 are amounts of VAT. Boxes 6 to 9 are not VAT: they are values before VAT.

Boxes 2, 8 and 9 are only for goods moving between Northern Ireland and the EU. A business with none of that trade enters nil in all three, and its box 3 is the same as its box 1.

This guide follows standard VAT accounting, where VAT belongs to the period of the invoice, paid or not. The special schemes work differently. The rates of VAT, the date a return is due and what happens when one is late all change, so they are not given here. They are on GOV.UK.

Zero rated and exempt sales carry no VAT, but they are still sales. Their value goes in box 6. Zero rated and exempt purchases go in box 7 in the same way.

Box 7 takes stock, equipment and expenses. Wages, and money the owner takes out, are not purchases for VAT and are left out.

Box 5 is never a minus figure. It is the difference, and the return shows which way the money goes.

Work through a return in the same order every time: the VAT boxes first, then the value boxes, then the check.

1. Make sure every invoice and credit note dated in the period is in the books. Box 1 follows the date of the invoice, not the date the customer paid.
2. Work out box 1 from the VAT columns for sales. The VAT on credit notes sent to customers comes off.
3. Enter box 2, which is nil with no Northern Ireland or EU trade. Box 3 is box 1 plus box 2.
4. Work out box 4 from the VAT columns for purchases. The VAT on credit notes from suppliers comes off, and so does any VAT that cannot be reclaimed, such as the VAT on entertaining customers.
5. Work out box 5: the difference between box 3 and box 4. If box 3 is bigger, the business pays HMRC. If box 4 is bigger, HMRC repays the business.
6. Work out box 6 from the net columns for sales, and box 7 from the net columns for purchases. Credit notes come off both.
7. Enter boxes 8 and 9, which are nil with no Northern Ireland or EU trade.
8. Check box 5 against the balance on the VAT account in the books. The two should agree.
9. Send the return, then pay. The payment is a debit to VAT and a credit to Bank.

Northgate Framing frames pictures. It trades only in England, so boxes 2, 8 and 9 are nil.

Box 1 is £5,260.00 plus £1,140.00, less £120.00 on credit notes to customers: £6,280.00. Box 3 is the same figure.

The cash and card purchases include a lunch for a gallery owner, with VAT of £42.00 that cannot be reclaimed. Box 4 is £2,870.00 plus £330.00, less £96.00 on credit notes from suppliers and £42.00 on the lunch: £3,062.00.

Box 5 is £6,280.00 less £3,062.00, which is £3,218.00. Box 3 is the bigger figure, so Northgate pays HMRC.

Box 6 is £26,300.00 plus £5,700.00 plus £850.00, less £600.00 of sales returns: £32,250.00.

Box 7 is £14,350.00 plus £1,650.00 plus £410.00 plus £380.00, less £480.00 of purchases returns: £16,310.00. The wages of £9,800.00 and the drawings of £4,500.00 are left out.

• Putting gross sales in box 6. Box 6 excludes VAT.
• Using the date the customer paid. Box 1 follows the date of the invoice.
• Leaving zero rated sales out of box 6 because they have no VAT. They add nothing to box 1, but they are still sales.
• Putting wages or drawings in box 7. Neither is a purchase of goods or services from a supplier.
• Adding the VAT on credit notes. A credit note to a customer takes VAT out of box 1. A credit note from a supplier takes VAT out of box 4.

• Box 3 is box 1 plus box 2, and box 5 is the difference between box 3 and box 4.
• Box 5 agrees with the balance on the VAT account for the period. If it does not, something is missing or wrong in the books or in the return.
• Boxes 6 and 7 hold no VAT, no wages and no drawings.

Box 6 is a quick check on box 1. If every sale carries VAT at the same rate, box 1 is that rate applied to box 6. When some sales are zero rated or exempt, box 1 is lower than that.