The VAT Return

The VAT Return in Xero shows the VAT amount your organisation owes to HMRC, or is owed by HMRC. This is based on the VAT period and scheme in your financial settings. The VAT calculation depends on when and how you've entered transactions. You can track VAT using the VAT Audit report.

Create the VAT Return

If you use a flat rate VAT reporting scheme, see Flat Rate VAT Return.

The latest VAT Return shows the period following the last return filed with HMRC or if none has been filed, it shows the period following the last published return.

If a return hasn't yet been published or your organisation is new to Xero, it shows the current VAT period to be published.

To open the VAT Return, in the Reports menu, select All Reports. Under Tax, select VAT Return.

You can also favourite the VAT Return to add it to the Reports menu.

Date range

You can change the period by entering your choice of month in the Ending field and clicking Update. If you've run a draft VAT Return and the reporting period doesn't match your current financial settings, Xero displays 'From' and 'To' fields. You can change the period by updating these fields and clicking Update.

If you're getting ready to publish your VAT Return for the current period in Xero and file it with HMRC, make sure the previous period is published and filed before accounting for any late claims. We also recommend you publish and file returns in sequence. This makes sure VAT transactions entered after the VAT period aren't accounted for twice.

File the VAT Return with HMRC

Include VAT Late Claims

As long as you've published your previous period's return, select the Include VAT Late Claims checkbox to include late claims on the return.

Late claims

Check the Include VAT Late Claims checkbox to include late claims on your return.

VAT late claims

Update

Enter or update details of the report you want to run and click Update to generate the report.

If you change the report dates, or invite your accountant or bookkeeper to view the report, the report is automatically saved on the Draft tab.

View the VAT Return to see VAT for the selected period.

Late claims

Late claims are transactions that are entered in the current VAT reporting period but which relate to a previous reporting period.

The reporting period is determined either by the date of the transaction or the date of payment, depending on the accounting basis:

  • Accrual basis - The date of the transaction
  • Cash basis - The date of payment

You need to publish the previous period's VAT Return and select the VAT Late Claims checkbox so all late claims transactions are included. We recommend you publish all VAT Returns in sequence.

Publish the VAT Return in Xero

VAT late claims checkbox

VAT Audit Report: Late claims are included in a separate section for each VAT rate labelled 'Late Claims', for example, '20% (VAT on Expenses) Late Claims'.

Transactions dated before the conversion date and pre-conversion transactions that are edited after the conversion date won't be included as late claims.

Report settings based on financial settings

Xero populates the VAT Return based on the VAT basis and period you've specified in your financial settings for the current VAT period.

Specify VAT scheme and period.

You can update these details and Xero will run the VAT Return based on those. You need to complete these fields before the VAT reports will run correctly.

You can only file with HMRC from Xero if you have entered a standard VAT reporting period in your financial settings.

VAT return prompt when information is missing.

The VAT Return prompts you if VAT information (such as registration number) is missing from your financial settings.

If you haven't entered a VAT Scheme on the Financial Settings screen, the VAT Return will not run.

View totals

The VAT Return automatically populates amounts for you:

  • Xero calculates the totals in each field on the VAT Return based on the VAT you've charged and paid during the report's period.
  • Amounts coded directly to the VAT account aren't included unless:

    • They also have VAT applied to the total
    • You used the VAT on Imports tax rate (Box 4)
  • Transactions included in the period of the report are determined by the VAT Scheme you've entered in the Financial Settings. 'Accrual' uses the invoice, bill or expense claim reporting date and 'cash' uses the bank transaction or invoice, bill and expense claim payment dates.
  • Transactions with tax rates using the tax type 'MOSS Sales' are not included in the VAT Return.

    How does Xero account for MOSS sales?

  • See How does the VAT Return work in Xero to understand how each field on the Return is calculated and how transactions using different tax treatments or tax rates are included, or not.

VAT Audit Report

Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return depending on the period and scheme you've chosen.

Xero links the VAT Return and VAT Audit Report for the period of the return you're completing. When you publish the VAT Return in Xero the VAT Audit Report is also published (on the Published tab).

Select Audit Report tab to run the audit report.

Adviser review

You can choose to ask your accountant or bookkeeper to review the VAT Return before you print, export, publish in Xero, or file with HMRC.

Request VAT Return review from adviser.

How to let someone with the Adviser user role review your VAT Return within Xero:

  1. Click the link in step 3 of the green window at the top of your return.
  2. Complete the email and select a user of your organisation who has the Adviser user role. They can then log in to your organisation to review your VAT Return.

    • Xero will prompt you to invite a user via email if your organisation doesn't have someone with the Adviser user role. You can invite a user via email if your role allows you to manage users, otherwise contact your Subscriber or someone else in your organisation who has access to add users.
    • If you leave the VAT Return to invite someone with the Adviser user role, come back to the return to email the person you just added.
  3. If you send a request to have the VAT Return reviewed, Xero saves it and you or someone with the Adviser user role can access it from the Reports Draft tab.
  4. Once the report has been reviewed, you or someone with the Adviser user role can publish the return, or file with HMRC.

If you are viewing a VAT Return that has been saved or published by someone with the Adviser user role, you may see summary information or additional notes on the report. Depending on the report's status and your role you can export, archive, save or edit it.

Reports and budget role comparison

Publish the VAT Return in Xero

You can publish the VAT Return in Xero to keep a record of your VAT within Xero for the period. Those assigned the Adviser or Standard + All Reports user roles can publish.

  1. Click File VAT Now at the bottom of your VAT Return. This takes you to the draft VAT Return.

    Click the File VAT Now button to go to VAT Return (Draft) and file and publish, or publish only.

  2. Click File & Publish at the bottom of the draft VAT Return.
  3. If you have the Adviser user role, clear the File now with HMRC checkbox, then click Publish VAT.

    Click the Publish VAT button to publish your VAT Return in Xero.

  4. If you have a Standard + All Reports user role, clear the File now with HMRC checkbox, then click File VAT.

    Click the File VAT button to publish in Xero.

  5. Go to Reports, then click All Reports where Xero displays the report under the Published tab.

Once published, you can't edit the report. You can delete the published return so that a new return can be published in Xero for that period. If you've archived a VAT Return, it can't be published again unless you delete the existing copy under the Archived tab first.

VAT Reconciliation report: amounts on your filed VAT Return are used as 'filed' amounts on the VAT Reconciliation report.

Publish VAT Returns in sequence

We recommend you publish VAT Returns in sequence. This makes sure any VAT transactions entered after their relevant VAT period are not accounted for in more than one VAT Return.

If you need to publish a report from a previous period, we recommend you either keep the report unpublished or delete and republish the report from each subsequent period.

If you have published a VAT Return out of sequence and don't want to republish subsequent reports, access the published VAT Audit reports for the affected periods to identify any duplicates. You could then run the VAT Reconciliation report from the beginning of the period you published out of sequence up until the end of the most currently published period, to make the necessary adjustments.

VAT Reconciliation report

File the VAT Return with HMRC

You can file the VAT Return with HMRC from Xero if you are assigned the Adviser or Standard + All Reports user role. Following these steps will also publish the VAT Return in Xero.

Important information about filing your VAT Return with HMRC

  • Register with HMRC for online filing, obtain an ID and select a password before filing your VAT Return with HMRC via Xero.
  • You can only file with HMRC from Xero if your VAT return period is monthly or quarterly. If you file for a different period, you'll need to submit your return to HMRC outside Xero.
  • You don't have to file your VAT Return electronically with HMRC via Xero, you can still publish your return in Xero and file it with HMRC through the Government Gateway.
  • Once you've filed the return with HMRC and the return is displayed on the Filed with HMRC tab, you can't delete the return.

File your VAT Return

  1. Click File VAT Now at the bottom of your VAT Return. This takes you to the draft VAT Return.

    Click the File VAT Now button to go to VAT Return (Draft) and file and publish, or publish only..

  2. Click File & Publish at the bottom of the draft VAT Return.
  3. Confirm the VAT No. you are using is correct, enter your Gateway User ID and password, and click File & Publish.

    If your password is 13 characters or more, enter the first 12 characters only.

    Click the File & Publish button to publish the VAT Return in Xero.

If you have filed the report with HMRC you can't file it with them a second time. You can run it again by choosing the same date range, but you can't file it again with HMRC for the same period.

All Reports: Published tab

Check status of filed VAT Returns

Xero displays filed returns under the Filed with HMRC tab and shows the return as Pending. This is because it has been sent to HMRC but they haven't processed it yet. Xero will also have published the return and displays it under the Published tab.

Your VAT Return can show as Pending for up to 48 hours.

Image shows VAT Return under Filed with HMRC tab with status 'Pending'.

Once HMRC has processed your return its status will change to Filed or Failed.

If your status is Failed, click on the VAT Return link to read the error message, or read the notification in your Xero inbox.

Troubleshoot VAT Return error messages

Image shows VAT Returns under Filed with HMRC tab with 'Failed' status.

Once you've filed the return with HMRC and the return is displayed on the Filed with HMRC tab, you can't delete the return.

Exporting and printing the VAT Return

Depending on your user role, you can export the VAT Return to Excel, PDF or Google Sheets formats. You can also print directly from your browser.

When you export your VAT Return to PDF, the supporting VAT Audit Report will be in the same PDF on the page following the VAT Return.

Similarly, when you export the VAT Return to Microsoft Excel or Google Sheets, you will export both reports, with each displaying on a separate tab.

VAT Audit Report

General information about what is displayed for the VAT Return

How does the VAT Return work in Xero? tells you where Xero gets the VAT figures from and what transactions are included on the Return.

If you're unsure about completing the VAT Return or how you should code for VAT on certain transactions (especially imports and exports) you should seek the advice of your accountant or bookkeeper.

Invite your accountant or bookkeeper to review your VAT Return

Xero uses only one VAT account. The VAT portion of all transactions you enter into Xero will go into this account to be used to create the VAT Return. This includes any VAT calculated using custom tax rates you have set up yourself. If you add additional accounts for VAT to your Chart of Accounts any VAT amounts assigned to them will not be included in the VAT Return or VAT Audit report. Read an overview of how VAT is treated in Xero in The accounting behind Xero.