The sales reported on your quarterly VAT returns should add up to the turnover in your accounts for the whole year.
It’s important to do this reconciliation of VAT returns to accounts figures at least once per year, as that is exactly what HMRC’s computer will do. If the computer spots a difference it will alert a tax inspector to issue an assessment for the VAT due on any apparently missing turnover.
If the VAT returns report higher sales than the accounts, an indication that the sales have been over-stated and too much VAT has been paid, HMRC won’t repay that VAT without a claim.
There are several reasons why the sales reported in your accounts may be higher than the total from your quarterly VAT returns. Some of your turnover may be exempt from VAT, or outside the scope of VAT if the sales are to businesses in other countries. We can help you explain any differences to HMRC, should they ask.
However, it is essential that you retain copies of your VAT returns. Although HMRC insists that all VAT returns are submitted online, you can only access copies of VAT returns submitted in the last fifteen months, no more. Don’t forget to print out your VAT returns once they have been submitted!