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Brian Redford, Deputy Director, Intermediaries and External Communication, Business Customer Unit of HM Revenue & Customs, outlines the benefits to business of filing VAT returns online.

Introduction

From 1 April 2010, if you’re VAT-registered and you have an annual turnover of £100,000 or more (excluding VAT), you will have to do your VAT returns online and pay your VAT electronically, for example, by direct debit.

Here at HMRC, we are urging businesses to beat the rush and enrol early for our VAT Online service, if they haven’t done so already.

There are also some changes affecting newly VAT-registered businesses. From 1 April this year, any business registering for VAT will also have to file online from the very start, whatever its turnover, and pay electronically. So if you’re going to be starting up a new business in the near future, you’ll need to be aware of these changes if you register your business for VAT.

Enrolling for VAT Online is Easy

Whether you are a new or existing user of HMRC Online services, enrolling for the VAT Online service is easy, and will only take a few minutes. There is no Activation PIN issued for submitting VAT returns online, so you can sign up for the service and submit a return in one sitting. All you need to do is visit  HMRC Online - see Welcome to HMRC Online Services, select ‘Register’ in the new user section, and follow the instructions.

Filing VAT Online has Benefits

Simplicity - Filing your VAT return online is straightforward. The online VAT Return is very similar to the paper version and there are no changes to the rules on how you calculate VAT. You can still keep your records on paper, if you prefer.

User-friendly system - You don’t have to be a computer expert to file online: on-screen information is provided to help you fill in your returns.

Security –You get a unique User ID and create a password to keep your details safe and all transactions are 100 per cent secure.

Speed and convenience - Online returns are also processed much faster than paper returns – some calculations are carried out automatically which reduces the risk of error, so that you are less likely to have your return sent back for correction.
 
What’s more, you can file your return at any time of day or night – there is no need to worry about your return being lost or delayed in the post.

And as soon as you have successfully submitted your returns, you receive an on-screen acknowledgement with a unique confirmation number. Or, if you prefer, you can use a commercial software package which would allow you to submit your return direct from the software.

Which Tasks can be Completed Online?

The following tasks can be carried out online:

• registering a business for VAT,
• submitting your VAT return,
• notifying us of changes to your VAT registered business,
• opting to receive e-mail reminders when your returns are due and
• submitting any EC Sales Lists (ESL) using the ESL Online service (ESCL).

How do I Pay Electronically?

Businesses that are required to file their VAT returns online are also required to pay what they owe electronically. If you pay using the Bankers Automated Clearing Service (BACS), Bank Giro Credit Transfer, Clearing House Automated Payment System (CHAPS), or telephone or Internet banking, then you may benefit from up to seven extra calendar days in which to pay. Eligible businesses that pay by Online Direct Debit may get even longer to pay. Full details are available on our website at How to Pay VAT

I Need to File my VAT Return Online – What do I Need to Do Next?

If you think you will have to submit your VAT Return online from 1 April 2010, you should take the following action now:

• Identify your preferred form of electronic payment (eg Direct Debit, Internet banking) and set up the necessary arrangements.
• Sign up and enrol for the VAT online service. (You will need to do this to submit your VAT Return online, whether you choose to use commercial software or HMRC's free software.)
• Talk to your accountant if they will be submitting your VAT Return online on your behalf, and discuss what you both need to do.
• Consider whether you need to change any of your business processes for checking and signing off your VAT Return.

My Turnover is Below £100,000. Do I Still Need to File Online?

Paper filing will remain an option for existing VAT traders with a turnover which stays below £100,000 but anyone who registers a business for VAT after 1 April 2010 will have to file online.

Even if you currently have a turnover below £100,000, it’s worth finding out more about VAT online, because HMRC’s working assumption is that all businesses will be required to file their VAT returns online by 2012 at the latest.

This year, 6.4 million Self Assessment tax returns were filed online – three quarters of all returns submitted. So, if you’re not already filing VAT returns online, why not give it a try? And if you already are, you should be seeing further improvements in a number of areas in the very near future.

Further Information

For further information about all aspects of VAT, including filing online, go to Online VAT Returns

For beginners’ guides to signing up to use the VAT Online service and completing your VAT Return online, visit the Beginner's Guide to Signing Up to the VAT Online Service and the
Beginner's Guide to Completing your VAT Return Online (both pdfs)