Does turnover on the CT600 include VAT? Three cases compared

In short: No, not for a company that accounts for VAT in the normal way. Turnover in its accounts and in box 145 of the Company Tax Return (CT600) leaves out the VAT charged to customers, because that VAT is owed to HMRC (HMRC manual BIM31525). Flat Rate Scheme companies usually deduct the flat-rate VAT they pay instead, and unregistered companies show what they charged. Taxley prepares and files the CT600 for £49.95 with micro-entity accounts, then files the accounts at Companies House once the return is paid and finished.

Take the 30-second check to see whether Taxley fits your company, or see what goes in each CT600 box.

Key facts (checked on 4 October 2026)

Does turnover on the CT600 include VAT?

No, for a company that accounts for VAT in the normal way. Box 145, "Total turnover from trade", asks for the company's trading turnover, and company law defines turnover as the amounts from selling goods and services after deducting trade discounts, VAT and other taxes based on those amounts (Companies Act 2006 s.474).

HMRC's note for box 145 says to enter "the total trading turnover from any source", and that an investment company doesn't complete the box (HMRC: The Company Tax Return guide). The note doesn't mention VAT, so the figure comes from the turnover in the company's accounts. The answer therefore turns on how the accounts treat VAT, which depends on the company's VAT position. The trading profit in box 155 starts from the same accounts, so VAT wrongly left in turnover can overstate the profit and the tax as well, not just one box. Bank interest isn't turnover at all for most companies; it goes in box 170, covered in our guide to company bank interest on the CT600.

How should a VAT-registered company show its turnover?

Net of VAT. A VAT-registered business is a collecting agent: the VAT it charges on sales, the VAT it reclaims on purchases and the payments to or from HMRC all go to a VAT account, while the sales and purchases in the accounts exclude VAT (HMRC manual BIM31525).

The VAT account normally stays out of the profit. HMRC's manual says its balance appears on the balance sheet as an amount due to or from HMRC, and that neither the balance nor the entries in it enter the trade profits or the capital allowances. Two practical results follow. Input VAT the company reclaims isn't a cost, because the purchases are already shown without it. And the cost of an asset for capital allowances is its cost excluding VAT (HMRC manual BIM31525). On the CT600, box 145 takes the sales without the output VAT, and the trading profit in box 155 starts from costs without the VAT reclaimed.

Some VAT-registered companies keep their books "VAT-inclusive", with VAT left in both sales and expenses. HMRC says such accounts aren't in line with generally accepted accounting practice, but the right profit still comes out if the net VAT due to or from HMRC is also put through the profit and loss account (HMRC manual BIM31530). The common slip when filing yourself is half of that method: taking turnover from bank receipts, which include VAT, while leaving the VAT payments out of costs. The profit then includes VAT that went to HMRC. Our guide to common CT600 mistakes when you file it yourself lists other errors worth checking before you file.

How does the Flat Rate Scheme change turnover for Corporation Tax?

The company keeps the difference between the VAT it charges and the flat-rate VAT it pays, so that difference is income. HMRC's manual says turnover is likely to be shown net of the flat-rate VAT payment, though some accounts show the payment as an expense instead, which gives the same profit (HMRC manual BIM31585).

The scheme works differently from standard VAT accounting. The business still charges customers VAT at the normal rate, but pays HMRC a fixed percentage and keeps the rest, and it can't reclaim VAT on purchases except on certain capital assets over £2,000 (GOV.UK: VAT Flat Rate Scheme). The percentage is applied to VAT-inclusive turnover and usually depends on the business type. A business can join if it expects VAT taxable turnover of £150,000 or less, excluding VAT, in the next 12 months (GOV.UK: Who can join). It must usually leave if its turnover in the 12 months before an anniversary of joining was more than £230,000, including VAT (GOV.UK: If your circumstances change).

For Corporation Tax, the manual says expenses will probably be shown including VAT, because the VAT on them is irrecoverable, much as for a business that isn't registered. Irrecoverable VAT on a capital item is part of its cost for capital allowances, while VAT reclaimed on a capital asset under the £2,000 rule comes out of that cost (HMRC manual BIM31585). HMRC's own example has gross sales of £84,000, including £14,000 of VAT, and a flat-rate payment of £5,040, so the accounts show turnover of £78,960. A business that spends little on goods pays 16.5% as a "limited cost business" (GOV.UK: How much you pay).

What counts as turnover if the company isn't VAT-registered?

What it charged customers. A company that isn't VAT-registered has no VAT account and doesn't account for VAT on its sales, so there is nothing to take out. VAT it pays on purchases can't be reclaimed, so it is part of the cost: the deductible purchases figure includes that irrecoverable VAT (HMRC manual BIM31535).

The same rule reaches assets. HMRC's manual says capital expenditure that qualifies for capital allowances counts with its irrecoverable VAT included, and VAT on capital spending that doesn't qualify is part of that capital cost, not a deduction (HMRC manual BIM31535). A laptop costing £1,000 plus £200 of VAT is therefore a £1,200 asset for an unregistered company and a £1,000 asset for a registered one on standard VAT accounting. Running costs work the same way: a £120 software subscription that includes £20 of VAT is a £120 expense for the unregistered company and a £100 expense for the registered one, which reclaims the £20 instead.

Registration can change the answer part way through a year. A business must register if its taxable turnover for the last 12 months goes over £90,000, or if it expects to go over £90,000 in the next 30 days (GOV.UK: Register for VAT). Below the threshold, registering is a choice. From the effective date of registration, the company charges VAT and must pay HMRC the VAT it owes, so sales from that date go into turnover net of VAT, while sales made before it stay as charged. If the company registered during its accounting period, check that the turnover figure follows that date.

Is turnover net of VAT for the micro-entity and small company limits?

Yes. The size limits sit in the same Part of the Companies Act as the definition of turnover, which deducts trade discounts, VAT and other taxes based on sales (Companies Act 2006 s.474). A micro-entity can have turnover of up to £1 million, and a small company up to £15 million, as one of three tests.

A company qualifies when it meets at least 2 of 3 conditions. For a micro-entity they are turnover of not more than £1 million, a balance sheet total of not more than £500,000 and not more than 10 employees (Companies Act 2006 s.384A). For a small company they are £15 million, £7.5 million and 50 employees (Companies Act 2006 s.382). These raised limits apply to financial years beginning on or after 6 April 2025 (SI 2024/1303, reg. 2). For a financial year that isn't 12 months, the turnover limit is adjusted in proportion, and after the first year a change in size counts only when it happens in two years in a row.

VAT can push a figure over the line. A company with £900,000 of sales before VAT, all at 20%, collects £1,080,000 from customers. Its turnover for the micro-entity test is £900,000, within the £1 million limit, not £1,080,000. Taxley's free company size checker applies all three tests, and our guide to what goes in micro-entity accounts explains the format.

What does a worked example of the three cases look like?

One company in three VAT positions: £40,000 of work priced before VAT and £10,000 of goods bought before VAT. Turnover is £40,000 on standard VAT accounting, £42,960 on the Flat Rate Scheme and £40,000 unregistered. The profits of £30,000, £30,960 and £28,000 give Corporation Tax of £5,700, £5,882.40 and £5,320.

Assumptions: a 12-month accounting period, no associated companies, and sales and purchases at the 20% standard rate (GOV.UK: VAT rates). Sales are below the £90,000 threshold, so VAT registration is optional. The Flat Rate Scheme rate is 10.5% for computer repair services (GOV.UK: How much you pay), after the first year of registration. The goods cost more than 2% of turnover and £1,000, so it isn't a limited cost business.

On standard VAT accounting, the £8,000 of VAT charged and the £2,000 of VAT reclaimed both go to the VAT account, and the £6,000 difference goes to HMRC. Neither figure touches turnover or costs, so the profit is £40,000 less £10,000 (HMRC manual BIM31525). The cash agrees: £48,000 in, less £12,000 for the goods and £6,000 to HMRC, leaves £30,000. Each profit is £50,000 or less, so the 19% small profits rate applies to all of it (GOV.UK: Corporation Tax rates).

On the Flat Rate Scheme, the payment is 10.5% of £48,000, which is £5,040. The company keeps £2,960 of the £8,000 it charged as VAT, so turnover is £48,000 less £5,040, or £42,960. It can't reclaim the £2,000 of VAT on the goods, so costs are £12,000. Profit ends £960 higher than on standard accounting, and the tax £182.40 higher. The cash agrees again: £48,000 less £12,000 and £5,040 leaves £30,960. If the accounts show £48,000 as turnover and the £5,040 as an expense instead, the profit is the same (HMRC manual BIM31585).

Unregistered, the company charges £40,000 and the £2,000 of VAT on its goods is part of their cost (HMRC manual BIM31535), so £40,000 less £12,000 leaves £28,000. The mistake to avoid sits in the first column. If that VAT-registered company entered its £48,000 of receipts as turnover and kept costs at £10,000, it would report £38,000 of profit and £7,220 of tax: £1,520 too much. Taxley's free Corporation Tax calculator works out the tax for any profit, and our guide on how to calculate Corporation Tax covers the steps from the accounts to the bill.

Can Taxley take the turnover figure for your CT600?

Yes. Taxley (taxley.co.uk), UK online software that prepares and files the Company Tax Return (CT600) with HMRC and the annual accounts with Companies House, asks for turnover net of VAT and fills box 145 from the turnover you enter, never from other operating income or interest.

Each way of entering figures says the same thing. In Simple mode, the line is "Turnover", with the hint "Sales of goods and services for the period, net of VAT", and it also tells you to include other business income such as grants. The Advanced editor calls it "Turnover (sales of goods or services)" and asks for total sales for the period, net of VAT, on an accruals basis. The box-by-box Full CT600 view shows that figure feeding box 145, "Total turnover from trade". A company with both a trade and rental income enters its trading turnover on its own line, and that figure goes to box 145 exactly as entered.

When you import a trial balance, Taxley's matching rules never suggest a VAT account as turnover. An account with VAT, output tax, input tax or sales tax in its name goes to creditors or debtors on the balance sheet, and in the profit and loss Taxley leaves the line for you to choose. As with PAYE, a VAT account in credit goes in as money owed to HMRC, and one in debit as money HMRC owes the company. A line you picked for the same account in an earlier import is remembered instead. The preview lists every account with its line, which you can change before anything is imported.

Taxley doesn't work out VAT or the flat-rate payment, and it doesn't file VAT returns, so the turnover it uses is the figure your books give. A Flat Rate Scheme company enters turnover the way its accounts show it. When you add an asset for capital allowances in the Advanced editor, the cost box asks for the cost without any VAT you can reclaim, less any grant. The fee is £49.95 with micro-entity accounts or £139 with small-company accounts, including filing the accounts at Companies House once the return is paid and finished; you need the company's 6-character authentication code. Take the 30-second check to see whether Taxley fits your company, or see the prices.

Frequently asked questions

Is a VAT repayment from HMRC income for Corporation Tax?

Not for a company on standard VAT accounting. HMRC's manual says the VAT account balance is an amount due to or from HMRC, and that neither the balance nor its entries enter the computation of trade profits (HMRC manual BIM31525). A repayment just settles that balance.

Is VAT on a van or computer part of its cost for capital allowances?

It depends on the VAT position. Registered on standard accounting, the cost excludes VAT (BIM31525). Unregistered, it includes the irrecoverable VAT (BIM31535). On the Flat Rate Scheme, VAT reclaimed on an asset costing £2,000 or more including VAT comes out of its cost (BIM31585).

Does the VAT registration threshold use the turnover in the accounts?

No. VAT taxable turnover is the total value of everything sold that isn't exempt or outside the scope of VAT, measured over the last 12 months or the next 30 days (GOV.UK: Register for VAT). The accounts show turnover for the financial year, net of VAT.

Does the first-year Flat Rate Scheme discount change turnover?

It can. A business in its first year of VAT registration gets a 1% discount on its flat rate (GOV.UK: How much you pay). A smaller flat-rate payment leaves more of the VAT charged with the company, so turnover shown net of that payment, and the profit, both rise by the saving.

Do zero-rated and exempt sales count as turnover?

Yes. Company law counts the amounts from selling goods and services, after deducting VAT and trade discounts, whatever VAT rate applied (Companies Act 2006 s.474). Zero-rated sales also count towards VAT taxable turnover; exempt sales don't (GOV.UK: Register for VAT).

General information, not personalised tax or accounting advice.