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When and how to submit a zero or nil VAT return?

Completing your VAT Return might be challenging if you wait until the last minute or does not keep proper records of your income and expenses. At dns, we have seen a large number of VAT returns and assisted countless businesses in filing their VAT returns on time. In this blog, we shall discuss the concept of a Zero VAT return and whether it is required to file VAT returns in the absence of VAT or any trading activity.

When and how to submit a zero or nil VAT return?
In this article we cover:
  1. What is a “Zero VAT return” or “Nil VAT return”?
  2. Who can file a nil return?
  3. When do I need to file a Nil VAT return?
  4. VAT Notice 700/12: Filling and submitting a VAT return
  5. Process of filing and sending a VAT return or Zero/Nil VAT return
  6. Benefits of online VAT return filing
  7. What happens if I do not file a VAT return?

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

A Nil VAT Return, alternatively referred to as a Zero VAT Return, is a report sent to HMRC by a UK VAT registered business in the event when no VAT is due for the accounting period.

It is a widely held misconception that you are not required to submit a VAT Return if you did not engage in trading activities during an accounting period. If your business is VAT registered, you must file a VAT Return on a quarterly basis, and if you had no trade activity, you must submit a Nil VAT Return.

You must include the following information in your company's return to keep HMRC up to date:

  1. Total Sales and Purchases.
  2. The amount of VAT owed by you.
  3. The amount of VAT that you are eligible to claim.
  4. What your HMRC refund is?
  5. If you owe or claim no VAT, you are still required to file a return; this is referred to as a Zero VAT Return.

Who can file a nil return?

A Nil VAT Return can be submitted to HMRC only in certain circumstances. These include the following:

  1. VAT registered but engaged in no trading activity during the period.
  2. VAT registered primarily for the purpose of using the VAT MOSS Scheme and fall below the VAT threshold.
  3. New VAT registration and trading has been delayed.

If you were previously trading but ceased trade for one or more accounting periods, HMRC may conduct a review to determine if your firm should continue to be VAT registered.

When do I need to file a nil VAT return?

Every three months, you must file a VAT Return to HMRC. Your VAT Online Account contains information about when your return is due.

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

The notice assists companies to complete their VAT Return and makes available information on how companies can submit the return to HMRC. It provides guidance through the VAT form, box by box. Additionally, it provides special advice for companies that are using VAT accounting schemes and material on submitting the return by electronic means. Typically, for VAT-registered companies it is compulsory, by law, to file their VAT returns online and pay by electronic means. However, a company will not be required to do this if one or the other of the following apply:

  1. If the business is run completely by active members of a religious society whose principles avert them from using computers.
  2. It is not rationally feasible for an individual to use a computer to file their tax returns, remoteness of location, individual’s disability, or reason of age.

If either of the above stated applies to the company, they can contact the VAT Helpline or an accounting and taxation firm to talk over alternate arrangements. Additionally, a company will not be required to file returns online if it is subject to a bankruptcy procedure.

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. Organisations must take into account bank holidays, any postal delays and weekends If an organisation 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, organisations 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 organisation 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, organisations will be required to initiate the payment earlier
An electronic payment and electronic return (except online Direct Debit) Organisations 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, organisations will be liable to a surcharge for late payment If organisations submit their return online, they must pay by an approved electronic method
Pay by online Direct Debit and an electronic return Organisations 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 Organisation 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, organisation 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. An opportunity to obtain an electronic reminder when the return is due.
  2. Online method is secure and safe for sending the VAT return.
  3. The user is able to view an acknowledgement that HMRC has received the VAT return.
  4. Automatic computation to decrease errors when finalising the return.
  5. Up to 7 additional calendar days (compared to due date for cheques and paper returns) to file the return and pay the VAT due and if an organisations opts to pay the amount by Direct Debit online it is eligible for at least 10 additional calendar days.

What happens if I do not file a VAT return?

HMRC will record a 'default' against your business if you fall under the following conditions:

  1. They do not timely receive your VAT Return.
  2. If they do not receive full payment of the VAT due on your VAT Return by the specified deadline.
  3. If you fail to comply with any of the above, HMRC will record a default against your company and you will be placed into a 12-month'surcharge period' during which your business will be examined to ensure VAT Returns are filed.

However, if you default again within your surcharge period (forget to file your VAT Return on time), the following applies:

  1. The period of the surcharge is extended by another 12 months.
  2. You may be required to pay an additional amount in addition to the VAT you owe.

HMRC will send you a notice stating any surcharges you owe and the consequences of further default. Your surcharge is calculated as a percentage of the VAT owed on the due date; this percentage will be specified in the letter HMRC sends to you. You will not be penalised for your initial default.

If you would like to speak with our VAT expert and want assistance in filing of VAT returns/Nil VAT returns, please contact dns on 03330886686, or you can also e-mail us at info@dnsaccountants.co.uk.

About the author
Blog Author

Siddharth Agarwal
I am currently pursuing to become a chartered tax advisor and joined DNS in 2014. With more than 7 years of experience in advising owner managed businesses, I deal with a wide spectrum of tax issues, both for company and personal tax. My expertise cover owner managed business taxation issues, company re-organisations, property taxation and succession planning.

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