You are legally bound (upon registration) to return the output tax charged, minus input tax incurred to the HMRC. How simple is that? Many businesses fall foul of the Customs Office, due simply, to poor and incomplete records. Using KPB systems, VAT is not just recorded but real time budgets and forecasts will always maintain funds to discharge liabilities to Customs. Always remember that the VAT charged is not your money, it should never form part of any forecast or budget. In accountancy terms it can only appear on the balance sheet as owing or owed.