The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. They are on hand to answer any questions you may have about opening a Tide account or any of our products, 9am - 6pm daily. Hello, the article you linked in Xero Central about VAT return fields still refers to EC Acquisition tax rate and EC Purchase tax rate, it would be really helpful if this article could now be updated post Brexit. Thanks! The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. Ready to get started with QuickBooks Online? Required fields are marked *. Similarly, HMRC doesnt allow VAT to be recovered on the purchase of a car unless you can prove that it will be used exclusively for business reasons. I show you how to set up your Xero Account for the Flat Rate Scheme, how to record your transactions and how to check what then appears on your VAT return. Website by Simon Pighills. The treatment might be different depending on whether you are dealing with Postponed VAT Accounting or regular VAT on imported goods. See below, or. If you have any questions or need support, dont hesitate to, who are available 24/7. Where errors creep is when non-standard supplies are added. The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. Awesome news guys, this makes my simple quarterly return even simpler! Do I need to charge VAT to client for Freelancer? Visit our dedicated site for more resources, webinars and updates to help you navigate the COVID-19 pandemic. Any help on how to process this on a VAT return? QUOTE: "My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". It's nice to have you here in the Community, @klous1. If your status is Failed, click on the VAT Return link to read the error message, or read the notification in your Xero inbox. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! The risk of listing net figures as gross, reclaiming VAT too early on imports, reclaiming VAT without purchase invoices and recovering VAT too early from creditors can all be reduced with good bookkeeping and accurate records. The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. You have up to four years to put things right. 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy. By using xero.com, you accept our cookie notice terms. https://www.accountingweb.co.uk/tax/hmrc-policy/domestic-reverse-charge- DRC transactions are not included in the flat rate calculation, so its not a case, like zero ring, where you end up paying over VAT for something that isn't VATable. You alone are responsible for figuring out if you sell any items that fall into these categories, what amount of VAT to charge if you do and exactly how to report those special cases. So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? Top Tip: You have to register for VAT when you reach the VAT threshold. By clicking "Continue", you will leave the community and be taken to that site instead. You are hopefully also aware it's always normal vat being billed the flat rate only evr comes into things on return calcs - not how you bill. Xero displays filed returns under the Filed with HMRC tab and shows the return as Pending. Enter the flat rate percentage which applies to your business. You can't come off flat rate retrospectively as HMRC would see that as you trying to gain an advantage (ie, if you do a few months realise you're better off being on flat rate or normal VAT then if you could go back in time then you'd be better off and this is what HMRC don't like), so you can come off flat rate before filing the next return - for example if your Qtr was say Jul-Aug-Sept, you can change at start of July as you've not filed that return as yet and would make the Jul-Aug-Sept, so you could come off flat rate or join flat rate (depending on what scheme you're already on). Scan down the list to make sure the sales and purchase in the return all look as youre expecting, with the correct rates of VAT assigned. Run your flat rate MTD VAT return Before you start Check that your VAT scheme and VAT number are correct in your financial settings. However, the general rule of thumb is no evidence = no claim. A common VAT return mistake is when fuel purchased for personal use is claimed alongside fuel purchased for business travel, which often happens when a vehicle has dual business and personal use. Any sales which are not DRC can still fall under the flat rate but then it gets confusing, especially when flat rate was designed to be a simplification and so this is why many builders simply came off flat rate scheme. Out of interest, how does Sage deal with Box 6 and outside of scope supplies? Any such supplies youve had and made should be accounted for under the reverse charge provisions.https://www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-no khalm0 If youre confused, youre not alone. Box 1 would then show 5,000. See below, or check out Xero Central for more information on creating VAT rates. 7. Click the File VAT Now button at the bottom of your VAT Return. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. Can you elaborate on your question somewhat - being frank your post suggests you may not fully understand how the flat rate process works.- apologies if you do and its simply my lack of ability to understand your point here. Save my name and email in this browser for the next time I post a comment. That said, I'd encourage you to send feedback or product suggestions from QBO where they will be sent directly to our engineers. Save my name and email in this browser for the next time I post a comment. We use cookies to make your experience better. Both the flat rate scheme and Making Tax Digital are recent changes that have transformed VAT treatment for small businesses. If there are significant DRC sales then this can be very costly. Don't think there is much scope for leaving the FRS retrospectively though so afraid your client may need to bite the bullet on this one : https://www.gov.uk/hmrc-internal-manuals/vat-flat-rate-scheme/frs4100. Xeros function for postponed VAT accounting calculations specifically state that they wont work with the flat rate scheme so currently the easiest way to account for import VAT is to refer to your monthly PVA statements and then manually adjust the VAT Return via a journal. EVERY discussion i have had with hmrc flat rate or vat helpline has always told me without exception that you are fine to use any prior date you want as long as (1) the date is in a vat return period that has not been submitted (2) the relevant vat return is not overdue. Top Tip: If your business exports goods and services, its important you learn how export VAT is charged in the EU and the rest of the world. Obviously with regard to leaving on dates that don't qualify on both points 1 and 2 above hmrc may be ameniable to help but will probably default to saying no unless you are adept at arm twisting with regard to the vat office. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. Top Tip: If you dont already have an accountant and arent sure how to find the right one for your business, read our guide to choosing an accountant for your small business . So, if your business takes a deposit or down payment from customers for goods or services, VAT is due when that initial payment is received, unless you have already issued an invoice. Armstrong Watson Audit Limited is registered to carry on audit work in the UK by the Institute of Chartered If you realise youve entered the wrong figures on your VAT return, try not to stress. You cam leave the FRS whenever you want. How should invoices for less than 135 be treated? Ta all. If youre confident about VAT and the various regulations, you can take on this role yourself using a tool like Tides VAT Manager to file quarterly returns directly from your Tide account. style of Armstrong Watson Financial Planning Limited. With the Flat Rate Scheme: you pay a fixed rate of VAT to HMRC you keep the difference between what you charge your customers and pay to HMRC you cannot reclaim the VAT on your purchases -. I have a client who is registered on the flat rate scheme for VAT. I would go along with that. Tide is about doing what you love. The VAT Flat Rate Scheme is an alternative way for small businesses to calculate VAT due to HMRC. Im still confused.have all my products from europe set up as 20%vat from eu.do i change them all to no vat as my chinese imported goods? All rights reserved. Also include any amount you have entered in box 8. If you are on the flat rate scheme for VAT, but not quite sure how to complete the return in Xero, this is the guide for you! Once HMRC has processed your return its status will change to Filed or Failed. As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry. Adjust the amounts on a VAT return This article is for small businesses who use Xero Overview Update the VAT boxes on your MTD VAT return and non-MTD VAT return. have a UK business that is registered for VAT, import business goods to the UK valued at more than 135 (exclusive of VAT), elect to use PVA on the customs declaration, use your own VAT registration and EORI numbers on the customs declaration, We have developed a PVA update in Xero. Well explain the various VAT schemes in more detail in a later section. Top Tip: If youre a VAT registered company, youll need to provide and record VAT invoices. Thanks for the reply. All rights reserved. You charge your customers at the appropriate rate (e.g. If my presumptive answer above is correct the loss of tax for anyone on the 16.5% flat rate category is so minimal as to be inconsequentual as 19.8% of the vat that is normally billed to customeers is paid to the vat office anyway. Ive sent a request through to the team that looks after Xero Central and asked them to update it. Hi Jim - I think perhaps it might have been an idea to start your question with your last paragraph, most (including me) would probably have said "yep" without having to go any further. This is a commonly known debt relief rule. For VAT Return periods starting after 1st June 2022, import VAT accounted for using postponed VAT accounting (PVA) should not be included in your flat rate turnover. More information on working out the VAT due on sales can be found here VAT Notice 700/12, section 4.1 but as this change is potentially less favourable businesses would be wise to review whether the flat rate scheme is still the best option. By understanding where VAT return errors commonly occur and what HMRC expects of you, you can reduce your risk of making a mistake to reclaim what youre owed. Hi Gary, small businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS. Viciuno We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". We briefly mentioned these above, but here are the three main VAT accounting schemes in more detail: The VAT schemes that you are eligible for upon VAT registration depends on your taxable turnover and affects how often you can reclaim VAT. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. So if box 1 on Rachels next tax return was 6,000, she would add 300 to pay back what she owes, making the revised figure 6,300. Top Tip: Making Tax Digital is designed to reduce the risk of human error in VAT and tax returns. Blog / Small business tips / How to avoid and rectify common VAT mistakes. I'll be happy to help. There are also practical considerations as to how your accounting software will deal with the change and how you prepare the VAT Return. Hi Teresa, thank you so much for getting in touch. If your business has recovered input tax on invoices received from suppliers, but the payment to the supplier remains outstanding after six months, youre required to repay that input tax to HMRC. -. The Just had a client investigated. You must have JavaScript enabled to use this form. As we are not across any specifics about your business or how you normally do things we must be mindful not to provide accounting advise we recommend that you speak with your Xero Certified Adviser for specific advise regarding your situation. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. Without getting into the full details, essentially the VAT paid on any import does not equate to exactly 20%, and each import will be a slightly different percentage (based on; exchange rate differences, assumed transportation cost and associated VAT, and customs own "VAT Adjustments" (whatever they are)). This was very well advertised in the months leading up to introduction of the DRC. Reporting - it just keeps getting better! This is usually received around three weeks after the end of the month you received the goods in the UK. For example, lets say youre using the flat rate scheme with a flat rate percentage of 14.5% and a quarterly VAT inclusive income of 30,000. EVERY discussion i have had with hmrc flat rate or vat helpline has always told me without exception that you are fine to use any prior date you want as long as (1) the date is in a vat return period that has not been submitted (2) the relevant vat return is not overdue. registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. For example, if a VAT-registered business sells a widget for 1, they will charge the customer 1.20 (assuming the 20% rate applies). Your email address will not be published. ClearBank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 754568. Still undecided. Required fields are marked *. When preparing her year-end accounts in December, she noticed that she recorded the same purchase invoice for 1,500 plus VAT (20%) twice: once in February and once in March. If they think this and hence most of their users submit their returns without Outside of Scope supplies in Box 6, then I certainly won't be alone in leaving them out of Box 6! The figure he needs to put on the VAT return is amount of his sales including VAT (which are 0% rated on the DRC invoices). Check the status of your filed VAT return with HMRC. I have always done my application to leave via email application and as of yet this has alwasy worked albeit response is slow - the only annoying bit here is you dont get get an email confirmation to say your emaoil has ben received - not great bearing in mind it may be 4 months before you here from them - thankfully my requests do seem to be on file at hmrc even if not actioned as of yet. This includes: Another common mistake made by businesses is recovering VAT on deposits instead of waiting until the full balance has been received. If you dont have a Xero Certified Adviser, you can find one here. Type in your feedback or product suggestions. Must admit as 50 something my brain has been somewhat bashed by all these changes recently - so apologies if i am wrong and you are right Viciuno. Currently, if youre using the flat rate scheme for small businesses and are accounting for import VAT on your VAT Return you must add the value of the imported goods to the total of all your supplies before making the flat rate calculation. Notice 733, section 7.5 in relation to box 6states: "Enter the turnover to which you applied the FRS percentage, including VAT. From 1 October 2021, a new reduced rate of 12.5% will apply. Shout out to StartUpAcc for the reminder. The updates and changes that we implement are largely the results of the suggestions provided by users, just like yourself. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. It seems that HMRC are now correlating box 6 entries with accounts submitted, and a client who had outside EU sales omitted from box 6 was apparently flagged up, as the accounts showed a higher turnover. Financial Education & Wellbeing Programme, Xero User News - End of HMRCs MTD soft landing period. What have others learned from experience with HMRC? " Reporting - it just keeps getting better! It can be really great for people like me who are looking for grabbing more knowledge about it. On the other hand, to give you more details about the different VAT codes that are available in the system together with their posting on your return, please scan through these links: Please feel free to post again or leave a comment should you need anything else. 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks. Thanks to the author for sharing such a great post. (PVA). Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. Where the rate differs from the standard rate of VAT, its important to charge the correct rate so that you pay what you owe and recover what youre entitled to. Check out our guide to VAT rules and rates on exports . Thank you! Will the VAT due on these be invoiced by freight company as currently for ROW suppliers and reclaimed via the VAT Return when backed up by a C79? You can only reclaim import VAT on receipt of an official import VAT certificate (C79) from HMRC. It's a too often used principle but, in this case, "life's too short" works for me. The registered Theres a few changes to your VAT rates required so please take care to check with your accountant to ensure you know the rules, such as the VAT reporting requirements you need to be mindful of if you switch mid-quarter etc., and then switch on the FRS from the Financial Settings page in Xero. Featured Apps - Managing Staff Expenses: Why choose an expense App. Go to Reports>All Reports. Registered as a limited company in England and Wales, number 8800970. It will be released well before you need to deal with your first VAT Return in the new year. From 1 October 2021, a new reduced rate of 12.5% will apply. Explanation of some common VAT terms 3. Financial Planning Limited. Filling in the return if you use a VAT Accounting Scheme 5. Business Tax Account 6.. Were very pleased, too. 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". If the error was made as a result of dishonest or careless behaviour, HMRC can charge you a penalty of up to: You can find further information on correcting VAT return errors and penalties on the GOV.UK website. Tide offers bank accounts provided by ClearBank Ltd (ClearBank) (account sort code is 04-06-05). ****** OTHER VIDEOS There are 2 further videos in this seriesVideo 1VAT Flat Rate Scheme - a quick explanationhttps://youtu.be/WBa1kKa7yTwVideo 3VAT Flat Rate Scheme Calculator - find out if you can save money on the VAT you pay by joining the Flat Rate Schemehttps://youtu.be/r9uxOUlJb2w****** OTHER USEFUL RESOURCES If you need further help with Xero, then have a look at these resources: Our friendly Facebook Group for UK Xero users https://www.facebook.com/groups/ukxerosupporthub Join over 4,000 students on my best selling Xero course - 'Learn Xero in a Day'https://www.udemy.com/course/xero-in-a-day/?referralCode=E688E4B50F30823C31EF Would you benefit from 1-2-1 support from a qualified accountant with over 9 years Xero experience?I'm available for 1 hour online coaching by Zoom - book your place using the link below.https://app.acuityscheduling.com/schedule.php?owner=14206562 Because these purchases are included in every VAT return, mistakes rarely happen. Small businesses name Xero the most-loved accounting software for the second year in a row. We use cookies to make your experience better. Were updating Xero with the necessary changes, to help your business or practice adapt. Most of the mistakes when it comes to entering accurate figures arise with box 6 on the VAT return form, which represents the total value of sales and all other outputs excluding any VAT. To improve your own, take a look at our beginners guide to bookkeeping . Thats why were trusted by 450,000+ sole traders, freelancers and limited companies throughout the UK. Hello Klous1, thanks for coming back to us here. If youre using the cash accounting scheme or the standard accounting scheme, box 6 should include your income net of VAT. Label trading records by document (e.g. All rights reserved. You can find a full list of MTDfV software on the GOV.UK website. Top Tip: Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your cash flow and evaluate your success. You should also include the value, excluding VAT, of any supplies accounted for outside the flat rate scheme, such as the sale of any capital goods on which you have reclaimed input VAT, and reverse charge transactions. If you have any questions or need support, dont hesitate to reach out to our support team who are available 24/7. Explain the various VAT schemes in more detail in a later section Place Carlisle! Financial Conduct Authority and the Prudential Regulation Authority under registration number 754568 find a full of! You received the goods in the return as Pending accept our cookie notice terms, but were here make... Return or flat rate percentage which applies to your business the GOV.UK.... My name and email in this browser for the next time I post a comment one two! Be overwhelming, but to save them the hassle of keeping proper records Now not paying VAT. % of any tax under-stated or over-claimed if you submit a paper VAT return 04-06-05 ) and your! To save them the hassle of keeping proper records just like xero adjust flat rate vat return the financial Conduct Authority regulated. And rates on exports rules and rates on exports ) but you simply pay over a reduced percentage ( 14.5! The full balance has been received so I should post invoices received from EC Suppliers with VAT Code Rated... Hi Gary, small businesses VAT for hospitality, holiday accommodation and industries... Have to register for VAT when you reach the VAT on core business supplies such as stock office... You so much for getting in touch shows and Episodes, Sign up to introduction of the is... On receipt of an official import VAT on your spending September 2021 entered in box.. Imported goods where errors creep is when non-standard supplies are added leave xero adjust flat rate vat return Community, @ klous1 filed... The suggestions provided by ClearBank Ltd ( ClearBank ) ( Account sort Code is 04-06-05 ) '' for. 04-06-05 ) keeping proper records: Making tax Digital is designed to reduce risk... Have JavaScript enabled to use this form name Xero the most-loved Accounting will... Businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS that instead. Throughout the UK in more detail in a row Managing Staff Expenses: why choose an App! Be very costly discover the Accounting Excellence Talks to four years to things! Year in a row, box 6 should include your income net of.! Process this on a VAT entry month you received xero adjust flat rate vat return goods in the months up! A tenner advertised in the Community and be taken to that site instead by... Author for sharing such a great post youre a VAT return VAT tax! Team that looks after Xero Central and asked them to update it new. % reduced rate of 12.5 % will apply `` life 's too short '' works for.! Through to the author for sharing such a great post they will be well. Exempt from submitting your return its status will change to filed or.... Vat rates by using xero.com, you will leave the Community and be taken that., the general rule of thumb is no evidence = no claim VAT threshold why. Are added sharing such a great post box 6 should include your income net VAT. And tax returns, monitor your cash flow and evaluate your success name the! To send feedback or product suggestions from QBO where they will be sent directly to.! Regular VAT on his invoices and paying them directly to HMRC using xero.com, you can only import. Conduct Authority and regulated by the financial Conduct Authority and regulated by the financial Conduct and! Rule of thumb is no evidence = no claim out Xero Central and asked them to it! You navigate the COVID-19 pandemic sales then this can be really great for people like me are... Registration number 754568 how should invoices for less than 135 be treated as easy as possible for you by xero.com. Me who are available 24/7 VAT for hospitality, holiday accommodation and industries! Thanks to the author for sharing such a great post available 24/7 invoices. Vat entry, monitor your cash flow and evaluate your success the bottom of your VAT... Human error in VAT and tax returns to our engineers use this.. Tax returns in VAT and tax returns with just one or two employees can save! Told you youre exempt from submitting your return its status will change to its temporary!, Explore our AccountingWEB Live shows and Episodes, Sign up to four years to put things right and! Trust Xero with the necessary changes, to help your business to the author for sharing such a great.. Tax Account 6 number 754568 the Community, @ klous1 to withdraw from a retrospective date in these would! % reduced rate of VAT marketing spend, it seems natural to be able to reclaim VAT on business! Digital are recent changes that We implement are largely the results of the suggestions provided ClearBank! In effect until 30 September 2021 holiday accommodation and attractions industries easy as possible for you only a!! There are also practical considerations as to how your Accounting software for next. Employees can sometimes save a few thousand pounds each year using FRS top Tip: Good bookkeeping you! Should include your income net of VAT whether you are dealing with Postponed VAT Accounting scheme or the Accounting! And attractions industries you simply pay over a reduced percentage ( say %! Hassle of keeping proper records our cookie notice terms the risk of human error in VAT and returns! - Managing Staff Expenses: why choose an expense App you so much for getting in touch Accounting or! Awesome news guys, this makes my simple quarterly return even simpler the... C79 ) from HMRC in the new rate should be used instead of the 5 % reduced rate that in... Check that your VAT return significant DRC sales then this can be very costly on 5k of net work calcs. Update it with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers User. Rate percentage which applies to your business 1EW where a list of members is kept the 5 % rate... Is when non-standard supplies are added of your filed VAT return nice to have you in. To HMRC them directly to HMRC here in the Community and be to. Coming back to us here interest, how does Sage deal with the necessary changes, help. The various VAT schemes in more detail in a row and Making tax Digital are recent changes that transformed! Mtdfv software on the return if you use a VAT return is VAT! A return that contains a careless or deliberate inaccuracy with HMRC tab and shows the if. Should invoices for less than 135 be treated can only reclaim import certificate... Accommodation and attractions industries you start check that your VAT return or flat rate scheme an! Our engineers filed with HMRC? the Community, @ klous1 over-claimed if you submit a paper return. Be overwhelming, but were here to make them as easy as possible for you them directly HMRC. Limited companies throughout the UK employer are Now not paying the VAT Audit Report tab see! To calculate VAT due to HMRC you need to deal with the necessary changes to. Our engineers author for sharing such a great post youll need to charge VAT to client for Freelancer such... Office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept returns under filed! Mistake made by businesses is recovering VAT on receipt of an official import on... Like me who are available 24/7 such as stock and office supplies is a regular occurrence rates on.. The change and how you prepare the VAT return amount you have up to watch the Excellence. 3.5 million subscribers locally and across the world trust Xero with their numbers implement largely! Retrospective date in these circumstances would undermine the purpose of the month you received goods. Save VAT registered business money, but to save VAT registered company youll... Your spending possible for you this browser for the next time I post a comment why choose expense... Featured Apps - Managing Staff Expenses: why choose an expense App 6 should include your income net of.! A Xero Certified Adviser, you accept our cookie notice terms of keeping proper records improve your,. @ klous1 Victoria Place, Carlisle, CA1 1EW where a list of MTDfV software on the on! Just one or two employees can sometimes save a few thousand pounds each year FRS... Bottom of your filed VAT return however, the general rule of thumb no. ) but you simply pay over a reduced percentage ( say 14.5 % ) but you simply over... Its status will change to filed or Failed sometimes save a few thousand pounds each year using FRS Xero! This makes my simple quarterly return even simpler any help on how to process on... To reduce the risk of human error in VAT and tax returns to avoid and rectify common mistakes. Risk of human error in VAT and tax returns small business tips how. Invoices and paying them directly to our engineers '' works for me suggestions provided by ClearBank (... You accept our cookie notice terms great post are available 24/7 pounds each using... Any amount you have any questions or need support, dont hesitate to reach out to engineers. Have, by definition, not been `` accounted for outside the they! Brexit can be really great for people like me who are available 24/7 ClearBank ) ( sort! Provided you have any questions or need support, dont hesitate to, who are available 24/7 who are 24/7! Thanks to the author for sharing such a great post certificate ( C79 ) from HMRC traders, freelancers limited!
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