How to complete a VAT return in FreeAgent

Select Settings from the drop-down menu in the top-right corner, then VAT Registration. You need full (level 8) access to change these settings. Check:

• your VAT registration status, number and registration date
• whether you use invoice or cash accounting
• whether you're on the Flat Rate Scheme (only if HMRC accepted you) or the standard scheme
• your VAT return period dates

FreeAgent locks some of these settings once your first return is filed, so it's worth getting them right early. If anything here doesn't match your HMRC registration, fix it, or ask your accountant, before you file.

To file from FreeAgent you need its Making Tax Digital connection to HMRC. FreeAgent says the connection needs renewing every 18 months. If yours has lapsed, you'll be asked to reconnect before filing. Use your own business's HMRC login details for this.

1. Explain all your bank transactions in every business bank account up to the last day of the VAT period. FreeAgent won't let you file while relevant transactions are unexplained. Our bank reconciliation guide shows how.
2. Check sales invoices in the period have been sent or marked as sent, and out-of-pocket expenses have been entered.
3. Check VAT treatments: standard, reduced, zero-rated, exempt or outside the scope. Look closely at software subscriptions, overseas suppliers, mileage and entertaining, which are common errors.
4. Go to Taxes, select VAT, then choose the return. Use the Full Report tab to see the breakdown. This is for your reference and isn't sent to HMRC.
5. Compare the figures with what you expect. Is output VAT roughly 20% of standard-rated sales? Any unusually large reclaim?
6. When you're satisfied, use the filing option shown on the return (FreeAgent's help currently calls it File online with HMRC). Work through FreeAgent's checklist, then submit.

For the quarter you invoiced £10,000 plus £2,000 VAT and paid £3,000 plus £600 VAT on standard-rated business costs. If everything's recorded correctly, FreeAgent's return shows £2,000 VAT due on sales, £600 reclaimable and £1,400 to pay. If the return shows something quite different, look for a missing invoice, an unexplained payment or a cost with the wrong VAT rate before you file.

You can't pay HMRC from inside FreeAgent. After filing, FreeAgent shows a link to pay on GOV.UK, and you pay from your bank. When the payment comes out of your bank account, explain it in FreeAgent as a VAT payment so it isn't left unexplained. For the usual filing and payment deadlines, see GOV.UK: VAT return deadlines.