Submitting VAT returns is a legal requirement for VAT-registered businesses in the UK, but it is also one of the most commonly misunderstood accounting tasks. Even small errors can lead to HMRC penalties, investigations, and unnecessary stress. Many businesses assume VAT returns are straightforward, but the rules around input tax, output tax, exemptions, and deadlines can be complex—especially with changes under Making Tax Digital (MTD).
In this blog, we will explore the most common VAT return mistakes made by UK businesses and explain how professional VAT return services, such as those offered by The Infinity Group, help prevent these issues and keep you compliant with HMRC.
1. Missing VAT Deadlines
One of the most frequent mistakes is missing the VAT filing and payment deadline. VAT returns are usually due every quarter, and businesses must file and pay within 1 month and 7 days after the VAT period ends. Missing deadlines leads to late filing penalties, interest charges, and surcharge periods that can increase future penalties.
How Professional Services Prevent This
Professional VAT return providers use automated reminders and accounting software to track deadlines. They prepare returns in advance, review them for accuracy, and ensure submissions are made on time. This removes the risk of human error or forgetting to file.
2. Incorrectly Claiming Input VAT
Many businesses claim VAT on purchases they are not entitled to. Common errors include:
- Claiming VAT on non-business expenses
- Claiming VAT without a valid VAT invoice
- Claiming VAT on entertainment costs
- Claiming VAT on personal use items
HMRC expects accurate record-keeping and may reject claims or issue penalties if input VAT is claimed incorrectly.
How Professional Services Prevent This
VAT professionals know exactly which expenses qualify for input VAT. They review invoices, categorise expenses correctly, and ensure that only legitimate VAT is claimed. This prevents over-claiming or under-claiming, which protects your cash flow and compliance.
3. Not Charging VAT Correctly on Sales
Businesses sometimes fail to apply the correct VAT rate on sales. For example:
- Charging 20% when the correct rate is 5% or 0%
- Forgetting to charge VAT on taxable supplies
- Applying the wrong VAT treatment for international sales
These mistakes can result in underpayment to HMRC or overcharging customers.
How Professional Services Prevent This
VAT return specialists understand different VAT rates, exemptions, and cross-border rules. They review your sales processes and ensure VAT is applied correctly to each type of transaction.
4. Poor Record Keeping
HMRC requires businesses to keep VAT records for at least six years. Many small businesses store receipts incorrectly, lose invoices, or fail to maintain digital records under MTD. Poor record-keeping makes it difficult to calculate VAT accurately and increases the risk of errors or investigations.
How Professional Services Prevent This
Professional VAT services use accounting software to store, categorise, and track all VAT-related data digitally. This ensures that records are organised, easy to access, and HMRC-compliant.
5. Mixing Business and Personal Expenses
A common mistake made by small businesses and sole traders is mixing personal and business expenses. For example, using a personal bank account for business purchases and then attempting to claim VAT.
HMRC does not allow VAT to be reclaimed on personal expenses. Submitting mixed transactions can lead to rejected claims or penalties.
How Professional Services Prevent This
Professionals ensure business-only expenses are recorded. They help set up separate accounts, review expense claims, and ensure only valid business-related VAT is reclaimed.
6. Using the Wrong VAT Scheme
The UK offers several VAT schemes, such as:
- Standard VAT Scheme
- Flat Rate Scheme
- Cash Accounting Scheme
- Annual Accounting Scheme
Choosing the wrong scheme can lead to paying more VAT than necessary or causing cash flow issues.
How Professional Services Prevent This
VAT experts evaluate your turnover, business type, and transaction volume to recommend the most beneficial scheme. They also monitor your eligibility and switch schemes when needed to optimise your VAT position.
7. Not Adjusting for Reverse Charge or EU Transactions
The VAT reverse charge and post-Brexit VAT rules for EU imports and services have confused many businesses. Failing to apply the reverse charge correctly or misreporting EU transactions can lead to inaccurate VAT returns and HMRC queries.
How Professional Services Prevent This
Professional VAT providers understand reverse charge mechanisms and international trade rules. They apply the correct VAT treatment and ensure accurate reporting in boxes 1, 4, 6, 7, 8, and 9 of the VAT return when required.
8. Errors When Filing Under Making Tax Digital (MTD)
MTD requires VAT returns to be submitted using HMRC-approved digital software. Some businesses still attempt to use spreadsheets or manual methods, which can result in non-compliance.
How Professional Services Prevent This
Professional services use fully compliant MTD software that connects directly to HMRC. Providers like The Infinity Group manage the setup, ensure digital links are in place, and submit returns accurately through approved platforms.
9. Forgetting to Include All Sales or Purchases
Businesses sometimes forget to include:
- Online marketplace sales
- Cash sales
- Credit notes
- Prepayments or deposits
- Supplier invoices not yet entered into the system
Missing these entries can make the VAT return inaccurate.
How Professional Services Prevent This
VAT professionals reconcile accounts against bank statements, invoices, and sales platforms to ensure no transactions are missed. This results in more accurate VAT returns.
10. Ignoring VAT on Imports and Digital Services
Since Brexit, import VAT rules changed significantly. Businesses now need to account for import VAT using Postponed VAT Accounting (PVA). Digital services sold to EU customers also have special VAT treatments.
Incorrect VAT on imports or digital services can result in underpayment or overpayment.
How Professional Services Prevent This
Professional VAT providers understand current post-Brexit rules. They manage import VAT, use PVA correctly, and apply the correct VAT treatment to digital services.
11. Not Reviewing VAT Returns Before Submitting
A surprising number of businesses submit VAT returns without double-checking the figures. Simple typing errors or miscalculations can result in costly mistakes and HMRC investigations.
How Professional Services Prevent This
Professionals perform a full review of your VAT return, verify the data, and ensure consistency across financial records. This second-level check greatly reduces the risk of errors.
12. Trying to Handle VAT Alone Without Expert Help
Many business owners try to handle VAT themselves to save money. However, VAT is complex, and a minor mistake can cost more than the price of professional help. Without expert guidance, businesses risk penalties, cash flow problems, and compliance failures.
How Professional Services Prevent This
Professional VAT return services provide expert knowledge, accurate calculations, software compliance, and peace of mind. They handle the full process from record-keeping to submission, allowing you to focus on running your business.
How The Infinity Group Helps Businesses Avoid VAT Mistakes
The Infinity Group is a trusted payroll and accounting services provider in the UK, specialising in VAT returns for small businesses, contractors, and companies in construction and other industries. They help businesses stay compliant with HMRC by:
- Using MTD-compatible software
- Managing deadlines and submissions
- Accurately calculating VAT on sales and purchases
- Handling complex VAT situations such as CIS, import VAT, and reverse charge
- Providing expert advice on VAT schemes
- Reducing the risk of penalties and audits
With professional guidance from The Infinity Group, businesses can focus on growth while staying confident that their VAT returns are accurate and fully compliant.
Final Thoughts
VAT returns are more than just filling in a form—they require careful record-keeping, correct VAT treatment, and up-to-date knowledge of HMRC rules. The most common VAT mistakes, such as missing deadlines, incorrect input VAT claims, and poor record-keeping, can lead to penalties and financial losses.