What is included in a VAT return?

With a £90,000 VAT registration threshold, many UK businesses find themselves asking not just whether to register for VAT but what actually happens once they do. Understanding your VAT return: what it contains, how to complete it, and when it’s due, is essential for staying compliant and keeping HMRC off your back.

This guide breaks down everything you need to know about VAT returns, including a detailed walkthrough of each VAT return box, common mistakes to avoid, and how professional VAT return services can help.

What is a VAT return?

A VAT return is a form that VAT-registered businesses submit to HMRC to report the amount of VAT they’ve charged on sales (output VAT) and the amount of VAT they’ve paid on purchases (input VAT). The difference between the two determines whether you owe HMRC money, or whether HMRC owes you a refund.

Put simply: it’s how HMRC keeps track of VAT flowing in and out of your business.

VAT-registered businesses must submit a VAT return for each accounting period, typically every quarter, though some businesses submit monthly or annually. Most returns are now submitted digitally through Making Tax Digital (MTD) compatible software.

Who needs to submit a VAT return?

Any business registered for VAT in the UK must submit a VAT return. This includes:

Businesses with taxable turnover above the £90,000 VAT registration threshold (mandatory registration)
Businesses that have voluntarily registered for VAT below the threshold
Businesses based outside the UK that sell goods or services to UK customers

If you’re not sure whether you should be registered, it’s worth reviewing your taxable turnover regularly. Crossing the threshold without registering is a compliance issue that can result in backdated VAT liability and penalties.

Output VAT vs input VAT: the basics

Before diving into the VAT return boxes, it helps to understand the two core concepts that underpin every VAT return:

Output VAT is the VAT you charge your customers on taxable sales. You collect this on behalf of HMRC, it’s not your money to keep.

Input VAT is the VAT you pay on business purchases and expenses. You can reclaim most of this against your output VAT liability.

The difference between your output VAT and input VAT is what you either pay to or reclaim from HMRC.

Important: You cannot charge VAT on your sales or reclaim input tax from suppliers unless you are formally registered for VAT with HMRC. Charging VAT without being registered is a criminal offence.

VAT return boxes explained

A standard UK VAT return contains nine boxes. Each one captures a specific figure, and together they give HMRC a complete picture of your VAT position for the period. Getting each box right is the foundation of how to do a VAT return correctly, errors here are one of the most common VAT return mistakes businesses make.

Box 1: VAT due on sales and other outputs

Box 1 is where you record the total VAT charged on all your taxable sales during the VAT period. This is your output VAT, the VAT your customers have paid you, which you’re now passing on to HMRC.

This includes VAT on standard-rated sales (currently 20%), reduced-rate sales (5%), and any VAT due under the reverse charge mechanism (where you account for VAT on behalf of a supplier, common in certain construction and digital services). It does not include zero-rated or exempt sales.

If you’ve issued credit notes during the period, these should reduce your Box 1 figure accordingly. Accuracy here matters, overstating Box 1 means paying more VAT than you owe and understating it can trigger penalties.

Box 2: VAT due on acquisitions from EU member states

Box 2 applies to businesses that acquire goods from EU member states. Since the UK left the EU, this box is relevant primarily to businesses in Northern Ireland operating under the Windsor Framework, which maintains some alignment with EU VAT rules for goods.

For most GB-based businesses post-Brexit, Box 2 will be zero. If you do trade goods with EU suppliers and are based in Northern Ireland, the VAT on those acquisitions goes here. The corresponding value of those goods goes in Box 9.

Box 3: Total VAT due

Box 3 is simply the sum of Box 1 and Box 2. It represents the total VAT you owe before any input tax deductions are applied.

This is a calculated field in most MTD-compatible software, it totals automatically. However, it’s still worth checking manually to ensure the underlying figures in Boxes 1 and 2 are correct before moving on.

Box 4: VAT reclaimed on purchases and other inputs

Box 4 is your input VAT, the total VAT you’re reclaiming on business purchases, expenses, and other inputs during the period. This is where you recover the VAT you’ve paid to your suppliers.

Claimable input VAT includes: stock and materials, business equipment, professional services, utilities used for business purposes, and certain motor expenses (though car purchases are usually restricted). To reclaim input VAT, you must hold a valid VAT invoice from your supplier.

There are restrictions on input VAT claims. You generally cannot reclaim VAT on:

Business entertainment
Cars used for private purposes
Goods or services not used for business purposes

If you make both taxable and exempt supplies (a “partial exemption” situation), your input VAT recovery may be restricted and a partial exemption calculation will be required.

Box 5: Net VAT to pay or reclaim

Box 5 is the headline figure: the difference between Box 3 and Box 4. This is the amount you either owe to HMRC or are due back as a refund.

If Box 3 is greater than Box 4, you owe HMRC the difference which must be paid by your VAT return due date.
If Box 4 is greater than Box 3, HMRC owes you a refund which is typically issued within 30 days for standard VAT returns, sooner if you’re on the monthly return cycle.

This is the figure most businesses focus on, but it’s only as reliable as the data in the preceding boxes.

Box 6: Total value of sales and all other outputs (excluding VAT)

Box 6 is the net value of all your sales and outputs during the period, including standard-rated, reduced-rate, zero-rated, and exempt supplies. VAT itself is excluded from this figure.

This box gives HMRC a picture of your total business turnover for the period. It’s used to cross-check VAT ratios and identify anomalies, if your VAT collected seems low relative to your sales volume, it can flag for review.

One area that catches businesses out: if you receive payment in goods or services rather than money, the full value of those goods or services must still be included in Box 6. Similarly, if you’ve not charged VAT explicitly on a sale but the supply is taxable, the full price is treated as VAT-inclusive and you need to account for the VAT element.

Box 7: Total value of purchases and all other inputs (excluding VAT)

Box 7 is the net value of all your purchases and business inputs during the period, regardless of whether you’re actually reclaiming the VAT on them.

This includes all standard-rated, reduced-rate, and zero-rated business purchases.

HMRC uses Box 7 alongside Box 4 to assess whether your input VAT recovery rate is reasonable. A high Box 7 figure with a low Box 4 could indicate you’re either under-claiming or trading in a mix of taxable and exempt supplies.

Box 8: Total value of all supplies of goods and related costs (excluding VAT) to EU member states

Box 8 records the net value of goods you’ve supplied to EU member states. Like Box 2, post-Brexit this is primarily relevant to Northern Ireland businesses under the Windsor Framework.

If you’re a GB-based business exporting goods to the EU, those are treated as exports (zero-rated) and reported in Box 6, not Box 8. If you’re in Northern Ireland and dispatching goods to EU customers, those figures go here.

Box 9: Total value of all acquisitions of goods and related costs (excluding VAT) from EU member states

Box 9 is the counterpart to Box 2, it records the net value of goods acquired from EU member states. Again, this is largely a Northern Ireland-specific box for most post-Brexit businesses.

For businesses in scope, the VAT on these acquisitions is declared in Box 2, and the net value of the goods is captured here. Both boxes must be completed accurately for the return to reconcile correctly.

How to do a VAT return: step by step

Now that each box is clear, here’s a practical overview of how to complete and submit a VAT return:

Gather your records: Collate all sales invoices, purchase invoices, and receipts for the period. Your accounting software should do most of this automatically under MTD.
Calculate your output VAT (Box 1): Total the VAT charged on all taxable sales.
Calculate your input VAT (Box 4): Total the VAT paid on eligible business purchases. Ensure you hold valid VAT invoices for each claim.
Complete Boxes 6 and 7: Enter the net values of all sales and purchases respectively.
Complete remaining boxes: Fill in Boxes 2, 8, and 9 if applicable to your trading activity.
Review Box 5: Check the net payment or refund figure makes sense before submitting.
Submit via MTD-compatible software: Since April 2022, most VAT-registered businesses must keep digital records and submit returns using MTD-compatible software. Paper submissions are no longer accepted for the majority of businesses.
Pay any VAT owed: Payment must reach HMRC by the VAT return due date.

When is my VAT return due date?

Your VAT return due date depends on your accounting period. For quarterly filers, returns and payments are typically due one calendar month and seven days after the end of your VAT accounting period.

For example:

VAT period ending 31 March, due date is 7 May
VAT period ending 30 June, due date is 7 August
VAT period ending 30 September, due date is 7 November
VAT period ending 31 December, due date is 7 February

If you pay by Direct Debit, HMRC collects payment automatically around three bank working days after the filing deadline, so funds need to be available in your account at that point.

Missing your VAT return due date can result in a late submission penalty under HMRC’s new penalty regime (introduced January 2023), which uses a points-based system. Accumulating enough penalty points leads to a financial penalty.

Common VAT return mistakes to avoid

Even experienced bookkeepers make errors on VAT returns. Here are the most frequent ones to watch out for:

Claiming VAT without a valid invoice

HMRC requires a valid VAT invoice to support any input tax claim. Missing or incomplete invoices are a leading cause of disallowed claims on VAT inspections.

Reclaiming VAT on non-business expenses

If an expense has a personal element, particularly cars and entertainment, the VAT is either fully blocked or needs apportioning. Mixing up net and gross figures.

Box 6 and Box 7 require net (ex-VAT) figures

Entering gross (inc-VAT) amounts inflates your reported turnover and can trigger HMRC queries.

Missing the reverse charge

Certain services, particularly in construction and digital services, require the customer to account for the VAT rather than the supplier. Failing to apply this correctly can lead to both under-declared output VAT and incorrectly claimed input VAT.

Late registration

If your taxable turnover crosses £90,000 and you don’t register promptly, HMRC can backdate your registration and charge VAT on all sales from the date you should have registered, even if you never collected it from customers.

Incorrect treatment of partial exemption

If your business makes both taxable and exempt supplies, you can only recover a portion of your input VAT. Applying the wrong recovery percentage, or ignoring partial exemption entirely, can result in significant over- or under-claims.

What is a VAT return used for beyond compliance?

Beyond keeping HMRC satisfied, your VAT return data is genuinely useful for understanding your business. Box 6 gives you a real-time snapshot of your taxable turnover, useful for monitoring whether you’re approaching the threshold (if you’re voluntarily registered) or for tracking business growth.

Refund returns (where Box 4 exceeds Box 3) can improve cash flow, particularly for businesses that make zero-rated supplies (such as exporters or certain food and children’s clothing businesses) who regularly reclaim more VAT than they charge.

Reviewing VAT returns over time also helps identify discrepancies, unusual spikes in input VAT or drops in output VAT can flag errors, changed trading patterns, or potential fraud.

VAT return services: when to get professional help

VAT is one of those areas where the rules are clear, until they’re not. Complex trading structures, partial exemption, international supplies, and sector-specific schemes all add layers of complexity that make DIY VAT returns risky.

Professional VAT return services give you:

Accurate, compliant returns prepared by someone who knows the rules
Proactive identification of legitimate input VAT claims you might have missed
Peace of mind that your records will hold up to an HMRC VAT inspection
Advice on whether a VAT scheme could save you money

If your business has grown quickly, trades internationally, or operates in a sector with specific VAT rules (construction, healthcare, property, financial services), specialist support is well worth the investment.

Key takeaways

A VAT return has nine boxes, each capturing a specific aspect of your VAT activity for the period.
Output VAT (Box 1) minus input VAT (Box 4) gives you Box 5, the amount you owe or are owed.
VAT returns must be submitted digitally under Making Tax Digital for most businesses.
Your VAT return due date is typically one month and seven days after your accounting period ends.
Common mistakes include missing invoices, incorrect treatment of partial exemption, and late registration.
Professional VAT return services can save time, reduce errors, and identify recovery opportunities you may have overlooked.

If you’d like support with your VAT returns, get in touch with the Majors Accounts team.