VAT compliance at a glance

Quick reference for VAT-registered businesses. Bookmark this page and review before each VAT period.

Before submitting your VAT return

Complete your VAT return

Step-by-step guide to boxes 1-9, deadlines, and submission via MTD software.

VAT return deadline

Submit and pay within 1 month and 7 days after your VAT period ends.

Box 5 calculation: Box 3 minus Box 4 = Box 5
Positive figure: VAT to pay to HMRC
Negative figure: VAT to reclaim from HMRC (refund due)
Payment deadline: 1 calendar month and 7 days after the end of the VAT period (electronic payment)
Refund processing: HMRC typically processes refunds within 10 working days if return is straightforward

Understanding your VAT position

Most businesses pay VAT because they charge more VAT on sales than they pay on purchases. Businesses that regularly receive refunds include exporters (zero-rated sales) and businesses making significant capital purchases.

HMRC may query returns showing consistent refunds or unusually large claims.

Pre-submission checklist

All sales invoices entered for the period
All purchase invoices with valid VAT numbers recorded
Reverse charge VAT accounted for (services from abroad)
Box 6-9 figures exclude VAT (net values only)
Any corrections from previous periods included

Invoice compliance

VAT invoice requirements

Full, simplified, and modified invoice requirements. Issue within 30 days of supply.

Full VAT invoice checklist

For sales over £250, your invoice must include all 14 mandatory items.

1. Unique invoice number: Sequential number that follows on from the last invoice (no gaps or duplicates)
2. Supplier's name: Trading name or registered company name
3. Supplier's address: Full business address
4. Supplier's VAT registration number: 9-digit GB VAT number (format GB 123 4567 89)
5. Customer's name: Name of business or individual receiving the supply
6. Customer's address: Full address of the customer
7. Invoice date: Date the invoice is issued
8. Date of supply (tax point): Date goods were delivered or services completed (if different from invoice date)
9. Description of goods or services: Sufficient detail to identify what was supplied
10. Quantity of goods or extent of services: Number of items, hours worked, or other measurement
11. Unit price excluding VAT: Price per unit before VAT is added
12. Rate of VAT per item: Standard (20%), reduced (5%), or zero (0%) rate applicable to each item
13. Total amount excluding VAT: Net total before VAT
14. Total amount of VAT: VAT charged at each rate, shown separately

Additional requirements

Rate of discount - if applicable, show any cash or quantity discount offered
Total including VAT - recommended but not legally required
Currency - if not in sterling, also show VAT amount in sterling

Quick invoice checks

Your VAT number on every invoice
Sequential invoice numbering (no gaps)
Tax point date (not just invoice date)
VAT rate and amount shown separately
Sales under £250: simplified invoice acceptable

Reclaiming input VAT

Reclaim VAT on purchases

What you can and cannot reclaim. Evidence requirements and time limits.

Can reclaim

Business purchases with valid VAT invoice
Commercial vehicles (vans, lorries)
Import VAT (C79 certificate or PVA statement)
Staff entertainment (if open to all staff)

Cannot reclaim (blocked)

Business entertainment (clients, customers)
Cars (unless 100% business use)
Purchases without valid VAT invoice
Items for private use

Input tax evidence

No valid VAT invoice = no input tax claim. Always check supplier's VAT number is valid.

To reclaim input VAT on purchases, you must hold valid evidence. Without proper evidence, HMRC can disallow your input tax claim.

Valid VAT invoice: Original invoice from supplier showing their VAT number and breakdown
Import VAT certificate (C79): Monthly certificate from HMRC for import VAT paid (must keep original)
Postponed VAT accounting statement: Monthly statement for imports using PVA
Reverse charge documentation: Evidence of reverse charge applied on services from abroad
Supplier's VAT registration number: Must be valid at time of supply (can verify online)
Business use evidence: Evidence that purchase was for business purposes (not private use)

No invoice available: Cannot reclaim input VAT without valid evidence
Lost invoice: Request duplicate from supplier (must be clearly marked as copy)
Supplier not VAT registered: No VAT to reclaim on purchases from non-VAT-registered suppliers
Invoice missing VAT number: Contact supplier to correct - cannot reclaim without valid number

Record keeping

Retention: 6 years from transaction date
Digital records: MTD-compatible software required
Purchase invoices: Keep originals to support claims
C79 certificates: Must keep original (not copy)

Penalties at a glance

Late submission

Points-based system. £200 penalty when you hit the threshold.

From 1 January 2023, HMRC uses a points-based penalty system for late VAT returns. Each late submission adds a penalty point to your account. When you reach the threshold for your filing frequency, you receive a £200 penalty and continue to receive £200 for each subsequent late submission until points are reset.

Penalty amount (at threshold): £200 per late submission
Points threshold (annual returns): 2 points
Points threshold (quarterly returns): 4 points
Points threshold (monthly returns): 5 points
Points reset period (annual returns): 24 months of timely submissions after reaching threshold
Points reset period (quarterly returns): 12 months of timely submissions after reaching threshold
Points reset period (monthly returns): 6 months of timely submissions after reaching threshold
Effective date: VAT periods starting on or after 1 January 2023

How points accumulate

You receive one penalty point for each VAT return submitted late. Points accumulate separately from financial penalties:

Below threshold: No financial penalty, but points remain on your record
At threshold: £200 penalty for the late return that triggered the threshold
Above threshold: £200 for every subsequent late return until points reset

Resetting points to zero

To reset your points after reaching the threshold, you must:

Submit all outstanding returns
Submit all returns on time for the required compliance period: 24 months for annual returns, 12 months for quarterly returns or 6 months for monthly returns

If you have not reached the threshold, points expire 24 months after they were incurred (provided you have no further late submissions).

Penalty points and penalties if you submit your VAT return late (opens in a new tab)

Late payment

No penalty in first 15 days. 3% of what's owed at day 15, plus a further 3% at day 30, then 10% a year from day 31, plus interest from day 1.

From 1 January 2023, late payment of VAT incurs two separate penalties plus interest. The system operates differently to the points-based late submission regime.

First 15 days late: No penalty (but interest accrues from day 1)
16 to 30 days late: 3% of VAT outstanding at day 15
Over 30 days late (first penalty): 3% of VAT outstanding at day 15 PLUS 3% of VAT outstanding at day 30
Over 30 days late (second penalty): 10% per year (calculated daily on outstanding balance)
Late payment interest rate: Bank of England base rate plus 4% (calculated daily from due date, since 6 April 2025)
Effective date: VAT periods starting on or after 1 January 2023

Understanding the two penalty structure

First penalty: A fixed charge based on percentage of outstanding VAT:

Paid within 15 days: No penalty
Paid between 16-30 days: 3% of what you owed at day 15
Paid after 30 days: 3% (day 15) + 3% (day 30) = 6% of outstanding VAT

Second penalty: An ongoing daily charge (annualised at 4%) that accrues from day 31 until you pay in full. This is in addition to the first penalty.

Late payment interest

Interest is charged from day 1 after the due date at the Bank of England base rate plus 4% (since 6 April 2025). This is separate from penalties and applies to all late payments.

Interest calculation basis: Daily simple interest (not compounded)
Interest start date: Day after the payment due date
Current interest rate (January 2026): Check HMRC website for current Bank of England base rate plus 4% (since 6 April 2025)

Penalty points and penalties if you submit your VAT return late (opens in a new tab)

Quick links

gov.uk

VAT compliance checklist

VAT compliance at a glance

Before submitting your VAT return

Complete your VAT return

Pre-submission checklist

Invoice compliance

VAT invoice requirements

Quick invoice checks

Reclaiming input VAT

Reclaim VAT on purchases

Can reclaim

Cannot reclaim (blocked)

Record keeping

Penalties at a glance

Quick links

Submit VAT return (opens in a new tab)

Pay your VAT bill (opens in a new tab)

Correct VAT errors (opens in a new tab)

VAT compliance checklist

VAT compliance at a glance

Before submitting your VAT return

Complete your VAT return

Pre-submission checklist

Invoice compliance

VAT invoice requirements

Quick invoice checks

Reclaiming input VAT

Reclaim VAT on purchases

Can reclaim

Cannot reclaim (blocked)

Record keeping

Penalties at a glance

Quick links

Submit VAT return (opens in a new tab)

Pay your VAT bill (opens in a new tab)

Correct VAT errors (opens in a new tab)

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