When and how to submit a zero or nil VAT return? - Your Accounting Team

November 19, 2021by CBM Accounting0

If you wait until the last minute or do not keep accurate records of your income and spending, completing your VAT Return may be difficult. We’ve seen a lot of VAT returns at CBM Accounting, and we’ve helped a lot of businesses file their VAT returns on time. In this blog, we’ll look at the notion of a Zero VAT return and whether or not it’s necessary to file VAT returns when there’s no VAT or trade activity.

What is a “zero VAT return” or “nil VAT return”?

A Nil VAT Return, also known as a Zero VAT Return, is a report filed with HMRC by a UK VAT-registered firm when no VAT is owed for the accounting period.

It is a common fallacy that if you did not engage in trade operations during an accounting period, you are not needed to file a VAT Return. You must file a VAT Return on a quarterly basis if your firm is VAT registered, and a Nil VAT Return if you have no trading activity.

To keep HMRC up to date, you must provide the following information in your company’s return:

  1. Purchases and sales totals.
  2. The amount of VAT you owe.
  3. The amount of VAT that you are entitled to a refund for.
  4. What is the amount of your HMRC refund?
  5. You must file a return even if you do not owe or claim any VAT; this is known as a Zero VAT Return.

Who can file a nil return?

Only specific conditions allow you to file a nil VAT return with HMRC. The following are some of them:

  1. During the period, the company was VAT registered but did not participate in any trading activity.
  2. VAT registered only for the aim of taking advantage of the VAT MOSS Scheme and falling below the VAT threshold.
  3. The implementation of a new VAT registration and trade system has been postponed.

If you used to be in business but stopped for one or more accounting periods, HMRC may perform a review to see if you should keep your VAT registration.

When do I need to file a nil VAT return?

You must submit a VAT Return to HMRC every three months. When your return is due, it will be included in your VAT Online Account.

VAT notice 700/12: filling and submitting a VAT return

The notice supports businesses in completing their VAT returns and provides guidance on how to submit them to HMRC. It takes you step by step through the VAT form, box by box. It also includes material on completing the return electronically and additional guidance for businesses that use VAT accounting systems. In most cases, VAT-registered businesses are required by law to file their VAT returns online and pay via electronic methods. However, if one or more of the following apply, a corporation will not be compelled to do so:

  1. If the company is entirely operated by members of a religious organization whose beliefs prohibit them from utilizing computers.
  2. Because to the distance of the site, the individual’s infirmity, or the individual’s age, it is not logically viable for an individual to use a computer to submit their tax returns.

If the company falls into one of the categories listed above, they can contact the VAT Helpline or an accounting and taxation professional to discuss alternative arrangements. In addition, if a corporation is through bankruptcy proceedings, it will not be compelled to file returns online.

Process of filing and sending a VAT return or zero/nil VAT return

Mode of filing the return Description Additional information
Filing a paper return and pay by cheque The return must reach HMRC on time for the cheque to clear into the bank account before the due date mentioned on the return – due date is usually 1 month afterward the end of the VAT period. Organizations must take into account bank holidays, any postal delays and weekends If an organization uses the Annual Accounting Scheme, the due date to file the VAT return is 2 months (rather than 1 month) after the completion of the VAT period. In this scenario as well, the return and payment must reach HMRC on time for cheque to clear into the bank account before the due date shown Cheque payments should reach HMRC before the due date. A cheque usually takes 3 bank working days (excluding Saturdays, Sundays, and bank holidays) to clear. To avoid any delays by post, organizations are advised to send documents at least 3 working days before so that it can reach HMRC
Filing a paper return and paying electronically A business receives up to 7 extra calendar days for both electronic payment and return to reach HMRC (except if the business uses the Annual Accounting scheme or make Power of Attorney (POA)) A business must ensure that funds should be cleared in HMRC’s bank account by the seventh day, prior to the due date else the business will be liable to an additional charge for late payment It must be noted that an organization will not get extra time to file a paper return in case of ‘Zero VAT return’ or if it is a repayment In case the seventh day of the calendar is a bank holiday or a weekend, the return along with payment must reach HMRC before the holiday or weekend. Bank working days are from Monday to Friday apart from bank holidays For payments made other than CHAPS, it usually will take 3 bank working days to clear the payment to HMRC’s account. Please check with building society or bank and confirm the time it takes to transfer the amount. If building society or bank take a longer time, organizations will be required to initiate the payment earlier
An electronic payment and electronic return (except online Direct Debit) Organizations will typically get an additional 7 calendar days for returns (containing ‘Zero VAT’ return and repayment returns) and any electronic payment to reach HMRC (except if the business uses the Annual Accounting scheme or make Power of Attorney (POA)) A business must ensure that funds should be cleared in HMRC’s bank account by the seventh day, prior to the due date else the business will be liable to an additional charge for late payment If payment reaches HMRC later than the due date, organizations will be liable to a surcharge for late payment If organizations submit their return online, they must pay by an approved electronic method
Pay by online Direct Debit and an electronic return Organizations will typically get additional 7 calendar days for the return to reach HMRC (except if the business uses the Annual Accounting scheme or make Power of Attorney (POA)) In case the seventh day of the calendar is a bank holiday or a weekend, the return along with payment must reach HMRC before the holiday or weekend. Bank working days are from Monday to Friday apart from bank holidays Organization must set up DDI prior to submitting the next return and this should be done at least 2 bank working days prior to the return due date. If the return due date falls on a bank holiday or weekend, organization will be required to set up DDI at least 3 bank working days prior to the return is due

Benefits of online VAT return filing

  1. A chance to get an automated reminder when your tax return is due.
  2. Sending the VAT return through the internet is a secure and safe technique.
  3. The user can see an acknowledgment from HMRC that the VAT return has been received.
  4. When completing the return, use automatic computation to reduce mistakes.
  5. Up to 7 more calendar days (compared to the due date for cheques and paper returns) to submit the return and pay the VAT due, and at least 10 further calendar days if an organization chooses to pay the amount via Direct Debit online.

What happens if I do not file a VAT return?

If you meet the following criteria, HMRC will record a ‘default’ against your company:

  1. They do not get your VAT return in a timely manner.
  2. If they do not receive complete payment of the VAT payable on your VAT Return by the deadline, they will send you a letter.
  3. If you fail to comply with any of the following, HMRC will register a default against your firm and place you in a 12-month’surcharge period,’ during which your business will be scrutinized to ensure VAT returns are completed.

If you default again during your surcharge period (forgetting to file your VAT Return on time), you will be subject to the following penalties:

  1. The surcharge period is prolonged for another 12 months.
  2. In addition to the VAT you owe, you may be forced to pay a surcharge.

HMRC will issue you a letter detailing any surcharges you owe as well as the implications of continuing to default. Your surcharge is computed as a percentage of the VAT payable on the due date, as mentioned in the letter HMRC provides you. Your initial default will not result in a penalty.

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CBM Accounting LtdHeadquarters
Serving all kind of businesses for over a decade.
Our locationsWhere to find us?
cbmaccounting
Get in touchCBM Accounting Ltd Social links
Taking seamless key performance indicators offline to maximise the long tail.

Copyright by CBM Accounting LTD. All rights reserved.

Copyright by CBM Accounting. All rights reserved.

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