What do the VAT Boxes mean?
When a VAT return is submitted to HMRC, there are a total of 9 boxes that need to be filled in. Your bookkeeping software will automatically fill these boxes in for you when you run a VAT report for the required period using the data you have entered from your invoices and receipts.
The boxes will be displayed on the screen, and the amount of VAT payable (or repayable) highlighted for you to review before accepting to send the calculation to HMRC. This article will briefly explain each box to give you an understanding of what the return is calculating. Box 1 is the VAT you charged on sales invoices in the period to customers. If your business is trading, then there will always be a figure to go in this box.
Box 2 is for the VAT charged on services or products you have purchased from the EU member states. Rather than being called imports, these services or products are referred to as acquisitions. As many small businesses will not purchase services or goods from the EU this box will be nil.
Box 3 is the sum of Box 1 plus Box 2’s figures added together.
The VAT on expenses purchased for the business goes into Box 4 to be reclaimed against the sakes VAT. You must ensure that you have a VAT invoice for each VAT expense entered to this box, either digitally uploaded or hold a paper copy. The acquisitions of goods from VAT-registered EU member state suppliers can be reclaimed here; be mindful the figure used must match with what has been entered in box 2.
Box 5 is the sum of Box 3 less Box 4, and this is the amount that you either must pay to HMRC by the submission deadline, or HMRC are due to repay to you.
Boxes 6 to 9 do not have an affect on the VAT payment calculation, but the information is required by HMRC regulations.
Box 6 is the total of all sales invoices raised excluding VAT. This includes all sales invoices – from standard rate VAT, zero-rate items, exempt items and reduced rates products. Loans, dividends, and personal monies should be excluded from this box.
Box 7 is the total of purchases excluding VAT. Imports and acquisitions from EU member states should be included. This should include standard rate VAT purchases, as well as zero-rate, exempt and reduced rate expenses. Wages, salaries, PAYE and national insurances paid should be excluded, along with any money taken from the business by yourself for personal monies or as dividends.
Box 8 should show the amount of supplies of goods to other EU member states, such as freight and insurance costs involved in the distribution from the UK, and figures entered in this box must be included in the Box 6 figure total. VAT should be excluded from this box.
Box 9 shows acquisitions from EU member states excluding VAT, and the net cost of delivery expenses. Figures entered in Box 9 must also be added to the Box 7 total.
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