How do I Produce my VAT Returns (U.K. & Ireland)?

A Guide to preparing your VAT Return in the U.K. or Ireland.

Written By Gerry Mckeown ()

Updated at September 24th, 2021

1.     Introduction:

Before reading this Article you might want to familiarise yourself with the contents of the Article entitled “How does the System Facilitate VAT (Tax) Management (UK & Ireland)” in order to fully understand the application of EC VAT (Tax) Codes and Rates and their usage throughout the System.

The System allows for the submission of VAT (Tax) Returns on both the “Invoice” basis and the “Cash” basis according to UK and Irish rules respectively.  Clearly, it is the responsibility of the Client to comply with the Regulations governing which type of Return can or should be made.  See here for further information regarding UK Cash Accounting for VAT and on this web site for information regarding Ireland’s Cash basis; https://www.revenue.ie/en/vat/accounting-for-vat/accounting-for-vat-on-moneys-received/index.aspx

>    Invoice Based:  The VAT (Tax) returns are based on the value of the VAT (Tax) associated with Sales and Purchase Invoices (& Credit Notes).

>    Cash Based (Ireland):  The VAT (Tax) Return is based on the value of the VAT (Tax) associated with total Sales Receipts less the VAT (Tax) associated with Purchase Invoices (& Credit Notes).

>    Cash Based (UK):  The VAT (Tax) Return is based on the VAT (Tax) values associated with total Sales Receipts less total Purchase Payments.

The system allows you to continually update your VAT (Tax) Return as the VAT (Tax) Period progresses and you can also maintain several VAT (Tax) Returns simultaneously.  When you add (or allocate) Transactions to a particular VAT (Tax) Return, you can save the Return and subsequently recall it to add more Transactions or indeed to “un-allocate” previously allocated Transactions.   When you finally close off your VAT (Tax) Return and submit it to the Revenue Authorities, any Transactions which have not been included in that Return will be presented for inclusion in the next Return.

2.     Create a New VAT (Tax) Return:

Go to > General > VAT (Tax)  Reporting > VAT (Tax)  Management.  This will bring up the VAT (Tax) Return List screen which shows the History of your Returns (Returned Column)  You can now call up a previously "Saved" Return by Clicking on its Return Reference and update it further.  

Alternatively, if there is no previously saved Return on the “New Return” button at the bottom of this Window and this will then open up this Window;

In the header portion of this window you should enter a unique a Return Reference which will identify this Return discreetly from all other Returns, the VAT (Tax)  Accounting Method that you are using and the first and last dates of the Transactions to be included in the Return.  However, any transactions in the System prior to the “From” Date, which have not yet appeared on a VAT (Tax) Return (except those with the “Excl.” Box ticked), will continue to be presented until they have been added to a Return - such as the example in the first row above.

3.     Working with Transactions in the VAT (Tax) Return:

It is advisable to update the VAT Return on an on-going basis throughout the VAT (Tax) Period in order to evenly spread the workload.  Having called up the current Return you are working on, click on the “Show Unreturned” button to see the latest set of Transactions entered into the system through the normal course of operation, but not yet added to your VAT (Tax) Return - in each of the Tabs marked Sales, Purchases, etc.

You can now add these Transactions to your Return by clicking on the Check Boxes individually on the Right Hand side of the Window or by clicking on the “Select All” button in the bottom left hand side. You must then “Save” the return so that it can subsequently be recalled with these new transactions added.  When you next click on "Show Unreturned" these transaction will not be displayed - only new transactions entered into the system. 

To view all the Transactions, you should use the Drop Down List as shown below and click the Blank Space as demonstrated.  Equally you can select only those transactions which have not yet been added to the Return (“Unchecked”), or those which already have been added (“Checked”).

As with all Filter Screens in the System, you can use the “Key” Symbol to refine a search for a particular transaction as in this example where you might want to examine a Purchase Invoice according to the Suppliers Reference;

You can also examine the detail of a Transaction by clicking on the “+” on the left hand side;

And you can access the Master Account by clicking on any of the fields in "Blue".

The “VAT (Tax)  Reporting” Tab displays the current status of the various Boxes on your VAT (Tax) Return for all those transactions that have been added thus far;

4.     Making a VAT (Tax) Return:

In the bottom Right Corner of the foregoing Window you can see the various Reports available to you regarding your VAT (Tax)  Return.  The two VAT (Tax)  Summaries (Irish Format and UK Format) contain the details of what you enter into the required Boxes if you are making a paper based return or an on-line return.  The following is a sample of the UK VAT (Tax)  Summary report (make sure your Language Settings are English (United Kingdom) and not English (United States);

VAT Summary Report (UK Format)

  • Box 1 – This includes total of all Vat on Sales plus grossed up value of EU Purchases (purchase transactions marked with “EU Trade” and “Services” flags) as well as GL Journals where value is negative, i.e. increases your liability to the tax authority.
  • Box 2 – This includes total of all Vat on “EU Purchases” of “goods” (grossed up value of VAT for transactions flagged as “EU Trade” and “Goods”)
  • Box 4 – This includes total of all Vat on Purchases plus grossed up value of VAT on purchases marked as “EU Trade” (including “Services” and “Goods”). This also includes GL Journals from the “General” tab where value is positive, i.e. decreasing your liability to tax authority.
  • Box 6 – This includes total of all Sales excluding Vat plus the total of all Purchases flagged as “EU Trade” & “Services” excluding Vat.
  • Box 7 – This includes total of all Purchases excluding Vat plus the total of all EU Purchases (transactions marked as “EU Trade” – “Goods” and “Services”).
  • Box 8 – This includes total of all EU Sales of goods (transactions flagged as “EU Trade” and “Goods” only) excluding any “Services” and any Vat.
  • Box 9 – This includes total of all EU Purchases of goods (transactions flagged as “EU Trade” and “Goods” only) excluding any “Services” and any Vat.

UK Registered Companies must use the On-Line Service from April 2012 or otherwise you may have to pay a Penalty for submitting a paper based Return after that date.  For information on how the On-Line Service works see this topic, and here for signing up to the on-line service. Finally, this link deals with How to make a VAT (Tax) Payment in the UK.

The following is a sample of the Irish Format VAT (Tax) Summary;

For Irish Registered Companies this Web Site provides information on how to fill in and submit your VAT3 Return, and you can also submit your VAT3 Return On-line through the Revenue On-Line Service (ROS).  Click here for information.   You may also be subject to Mandatory e-Filing from June 1st, 2012.

When you have submitted your Return to the Revenue Authorities you should click on the “Return” button in the Window above in order to close off the VAT (Tax) Return as regards this system’s operation.

5.     Cash Based VAT (Tax) Returns:

Should you choose your VAT (Tax) Accounting Method = “Cash Ireland based” or “Cash UK based”, then the Sales and Purchases Tabs will show a list of Receipts and Payments (or in the case of Ireland, Sales Receipts and Purchase Invoices/Credit Notes). 

The Tax is worked out on the basis that the Receipt or Payment represents the Gross amount of the Goods or Services billed - i.e. the VAT (Tax) Inclusive amount.  For example, if the Receipt is for £1,000 at a Tax Rate of 20%, then the VAT (Tax) Exclusive Amount is £833.33 and the VAT Amount is £166.67.

Unallocated Receipts and Payments (i.e. Funds which have been entered into a Customer or Supplier Account without allocation to an Invoice or other Transaction) will automatically attract the Standard Rate of VAT (Tax) whilst they remain in that state.  After subsequent allocation, the Tax computation will be revised to reflect the Rate of Tax on the Invoice to which they were allocated.  If Unallocated Receipts and Payments are included in the VAT Return, and it is then closed off and submitted to the Revenue Authorities, it is possible that an Over-Claim or Under-Payment situation could arise if the subsequent allocation to an Invoice results in a different Tax Rate being applied to that Receipt or Payment.

In the case of an allocation against multiple Invoices at different Tax Rates, as in this example, the correct amount of VAT due on the Receipt or Payment will be raised (in this example both Invoices were in the amount of £250, one with a VAT (Tax) Rate of 23% and the other at 5%);

6.     Other options on the VAT (Tax) Return List:

One or two other facilities which are available regarding your VAT (Tax) Returns are as follows; 

>    On the VAT (Tax) Reporting Tab there is a Section for Notes you may wish to make regarding that particular Return. These are private Notes and will not appear on your VAT (Tax)  Return anywhere.  However, you must make such Notes prior to the closing of a VAT (Tax)  Return.

>    If there is correspondence regarding any of your Returns or any other relevant Documentation regarding a particular Return, you can scan and “Upload” this/these Document(s) for attachment to the listed VAT (Tax)  Return;

>    For more information on this topic, please refer to the Article “How do I Attach Document Images”.

   On the VAT (Tax) Return List Window, as with all Filter type Windows, you can use the Drop Down Boxes to refine the List and the Key Symbols together with their attached Selection Criteria to search for any particular List or sub-List. 

For more information on this topic refer to the Article entitled “How do I Navigate the General Features and Facilities of the System?