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Preparing and Filing the VAT Return

The ledger prepares the UK nine-box VAT return from the tax codes on posted journal lines. You calculate a period, check and correct it, save it as a draft and then file it, which freezes the figures and stamps every line it counted so no line is ever counted twice. Nothing is sent to HMRC from here: you submit through your Making Tax Digital software and record its reference.

Where to find it

Admin Panel → Finance:

  • Ledger & Finance — the VAT return tab: calculate, adjust, save, file and view returns

Architect Panel → ERP - Finance:

  • VAT Box Mapping — which box each tax code's amounts land in

Preparing a return

  1. Choose the company at the top and open VAT return. The period defaults to the last full quarter.
  2. Set VAT period from and To, and press Calculate.
  3. Read boxes 1 to 9. Box 3 is box 1 plus box 2; box 5 is box 3 less box 4, shown as To pay HMRC or To reclaim from HMRC; boxes 6 to 9 are whole pounds.
  4. Select a box to see the journal lines behind it.
  5. Read any Check warning above the boxes. It compares the net in boxes 6 and 7 with the net that boxes 1 and 4 imply for each tax code, and names a shortfall.
  6. Press Save as draft return. The draft appears under Returns.

Which lines are counted

Every posted tax-coded line of the company's book dated on or before the period end that is not already on a filed return. A line dated in an earlier period but posted after that period's return was filed is counted as a late line: a missed invoice goes on the next return. A line that is irrecoverable VAT is a cost and is in no box.

Correcting box 6 or 7

When the VAT was right but a net amount is missing from box 6 (sales) or box 7 (purchases), for example a supplier bill whose net went to expense without a tax code, use Adjust box 6 or 7… (or the Adjust box button on a check, which fills the shortfall in). Give the Date (in an open period), the Box, the Tax code, the Net amount, the Account the net was charged to, optionally the supplier or customer, and What was missed (recorded). Press Post the adjustment. It posts a VAT journal of two lines on the same account, one carrying the tax code, so no balance and no VAT figure changes.

Filing

  1. Submit the return through your MTD software. MTD data on the draft shows the return as the HMRC MTD VAT API expects it, for the HMRC period key you enter. It is shown, not sent.
  2. Press File… on the draft and enter the Submission reference.
  3. Leave Move the VAT this return counts ticked to post a VAT transfer journal from the VAT control accounts to the account with the VAT liability role, where the payment to HMRC clears it. Without that role the VAT stays on the control accounts.
  4. Press File the return. Filing is final: the boxes are recalculated and frozen, and every line counted is stamped with this return.

The Returns list shows each return's period, status (draft or filed), box 5, line count, who filed it and its reference, and the VAT transfer journal. View shows a saved return's boxes.

What goes wrong

  • "The draft return for … has not been filed, so its lines are counted here as late lines": file the earlier return first, then recalculate.
  • A box is wrong for one tax code: check the code's VAT return setting on Set-up.
  • The close check fails on VAT: no saved return covers the quarter end. Save at least a draft.

Worked example

For the quarter to 30 June the controller calculates the return. The check warns that box 7 is 2,400 short for S20: a supplier bill was posted to repairs without a tax code on its net line. They press Adjust box 7… (which fills in 2,400.00), choose the repairs account, name the bill, and post. After recalculating they save the draft, submit through the MTD software, file with the reference, and the VAT transfer journal moves the quarter's VAT to the VAT liability account.

Recommendations

  • Calculate early and read the checks; a shortfall is far easier to explain before filing.
  • File every return in order, so late lines land where they should.
  • Give an account the VAT liability role so filing clears the control accounts.
  • Record the submission reference exactly; it is the link to HMRC's receipt.