The registered Filling in the return if you use a VAT Accounting Scheme 5. Business Tax Account 6.. You cam leave the FRS whenever you want. Armstrong Watson is a trading style of Armstrong Watson LLP, Armstrong Watson Audit Limited and Armstrong Watson Details about our audit registration can be viewed at www.auditregister.org.uk, under reference number C005636012. 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. Tide is authorised by the Financial Conduct Authority (FCA) under the Electronic Money Regulations 2011 under firm reference number 900843 for the issuing of electronic money and the provision of payment initiation services and account information services under the Payment Services Regulations 2017. Hi Gary, small businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS. Tide is about doing what you love. About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction registered office is 15 Victoria Place, Carlisle, CA1 1EW. Your box 6 figure will be 30,000 and your box 1 figure for VAT due on sales and other outputs will be 4,350 (14.5% x 30,000). Expert guide to CIS and new reverse charge rules, Getting started with client engagement letters, A fool-proof marketing strategy for accountants. The Ready to get started with QuickBooks Online? Will I still be able to use Xero for MTD when I buy from EU? While theres no sure-fire way of preventing mistakes, you can reduce your chances of needing to make an adjustment by understanding VAT and having a system in place that makes filing returns as stress-free as possible. Hold off on any claim until the C79 certificate proves you are the owner of the goods. The end of the Brexit transition period is almost here. 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. This ensures the postponed VAT amounts required by HMRC are handled correctly. By using xero.com, you accept our cookie notice terms. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. But obviously this amount is too high as historically he has been @ 16.5%. Registered as a limited company in England and Wales, number 8800970. Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". By using xero.com, you accept our cookie notice terms. Further, there are several goods and services that are either VAT exempt (or qualify for partial exemption), out of the scope of VAT entirely, or charged at a reduced-rate or zero-rate. In most cases, providing the error meets HMRCs conditions, you dont need to report it. 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. Shout out to StartUpAcc for the reminder. Simply enter in your Percentage Rate into our new Flat Rate VAT Return and Xero will calculate the right amounts for you. Small businesses name Xero the most-loved accounting software for the second year in a row. 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. 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 By using xero.com, you accept our cookie notice terms. They will then pass on the VAT they collect to the government, typically on a quarterly basis, via a VAT Return. HMRC advice was include ALL sales in box 6, or you risk an enquiry, even if that doesn't make sense as the sales are "outside the scope of UK VAT". I have a client who is registered on the flat rate scheme for VAT. It is a tax imposed by the government that is collected by VAT registered businesses at every stage in the production line. Because it was a genuine mistake made within the reporting threshold and within the last four years, she can correct it on her next VAT return by adjusting the figure in box 1. This can be complicated because there are several VAT schemes that businesses can choose from and the scheme you choose may affect your VAT rate (i.e. Thank you so much for sharing your feedback with us. To reclaim VAT on any business expense, you must provide evidence in the form of a VAT invoice. By understanding the three main VAT schemes for small businesses, youll be able to choose the one thats right for your business and ensure the figures on your VAT return are correct. Its important to double-check that the figures entered into box 6 and box 1 are correct in relation to the accounting scheme youre using. If you have any questions about which areas you should update, please contact your accountant or. Check the status of your filed VAT return with HMRC. Youll then be notified of whether the amount you calculated is correct and how much interest or tax you owe. I will enusure in future i will always make my application to leave flat rate before i have done the final checks on said vat return :) Flat rate scheme Xero | VAT return flat rate scheme Xero Flat rate VAT scheme. No accounting transactions required. 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. 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? There is a code you need to create in the system, this article will help youhere with that, however just to let you know there will be no adjustment button made in the system for it though. The Flat Rate VAT return in Xero doesn't support Domestic Reverse Charge (DRC), so transactions need to be manually added using the reverse charge provision. "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). Unless otherwise indicated, either expressly or by the context, we use the word partner to If you cant or dont want to use PVA, therell be no change to the way you deal with VAT on imports for your business. Hello Klous1, thanks for coming back to us here. We have developed a PVA update in Xero. If there are significant DRC sales then this can be very costly. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. VAT, or value-added tax, is relatively straightforward in theory. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. Getting started with client engagement letters, A fool-proof marketing strategy for accountants, How digitalisation will help grow your practice, Filing options for small companies up for change. If you have any questions or need support, dont hesitate to, who are available 24/7. Featured Apps - Managing Staff Expenses: Why choose an expense App. By subscribing you agree to receive marketing communications from Tide. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. Because these purchases are included in every VAT return, mistakes rarely happen. Griffin is the trading name of Griffin Audit Limited. The rate you pay depends on your business activity and is a rate you agree with HMRC. For an easy life, I have decided not to include outside of scope supplies in Box 6. Tip We have separate instructions for our standard rate MTD VAT return and non-MTD VAT return. Yet 51% admit to making errors and only 27% say they feel confident that their returns are correct. You then reclaim VAT from your suppliers' invoices, whether or not you have paid the bill. 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. 2023 Xero Limited. Flat rate and old non-MTD VAT Returns will not have PVA functionality. Hi Roxanne, thank you very much for bringing this to our attention. Your box 6 figure will be 30,000 and your box 1 figure for 'VAT due on sales and other outputs' will be 4,350 (14.5% x 30,000). From 1 October 2021, a new reduced rate of 12.5% will apply. 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. Do I need to charge VAT to client for Freelancer? This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. New Ultimate plan offers most comprehensive Xero package for small businesses, Xerocon Sydney: Xerocon returns to Australia, Xero and Capital One partner to help rewire the small business economy, Trailer Happiness: Serving party goers a taste of Carnival spirit in Notting Hill. 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)). Once you are registered with HMRC, they will give you a rate. You can simply correct it by making adjustments on your next VAT return. 10. Eligible deposits with ClearBank are protected up to a total of 85,000 by the Financial Services Compensation Scheme (FSCS), the UK's deposit guarantee scheme. Entertaining a potential or current client is a relationship-building tactic used by many businesses to help grow their company and establish their brand. We are using QB Desktop as per the tag. how much VAT you charge to customers). About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction You can't rejoin the scheme for 12 months if you leave, https://www.gov.uk/vat-flat-rate-scheme/join-or-leave-the-scheme, Interesting use of words here by hmrc in the linked manual, "You should normally refuse an earlier date where the business has already calculated its VAT liability for the period(s) using the FRS accounting method. 8. 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. 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. Placing someone in charge of dealing with VAT day-to-day will help to avoid any confusion around tax and ensure records are consistent. 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. ASE Professional Services is a trading style of Armstrong Watson Audit Limited and Armstrong Watson LLP. 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. You'll need to make sure you include your EORI and VAT registration number on your customs declaration. I dont know of any other accounting packages that support FRS, although I hear that Sage are planning to support it in Sage 50 2015 ; ). Reporting - it just keeps getting better! VAT (value-added tax) is a tax on the sales of goods and services paid by consumers. How the flat rate MTD VAT return works Run your flat rate MTD VAT return Although I think you may be being a little harsh on our green friends. You can find a full list of MTDfV software on the GOV.UK website. Create a folder that contains copies of your VAT certificate, submitted VAT returns and all correspondence with HMRC. For further information visit fscs.org.uk. The issuer of your Tide card will be identified on your monthly card statement. You can only reclaim import VAT on receipt of an official import VAT certificate (C79) from HMRC. 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. If you do not have a tax rate of 12.5%, you can easily create one. If there are significant DRC sales then this can be very costly." Your email address will not be published. If your status is Failed, click on the VAT Return link to read the error message, or read the notification in your Xero inbox. In addition to the purchase of a car, mistakes are commonly made on lease cars, where 100% of VAT is recovered as input tax. With this scheme you pay HMRC a fixed rate of VAT, based on your sales, and do not claim back VAT on your individual purchases. Use our flat rate Making Tax Digital (MTD) VAT return if you're on a VAT flat rate scheme. How should invoices for less than 135 be treated? If you realise youve entered the wrong figures on your VAT return, try not to stress. 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. If youve made a genuine mistake on a VAT return that youve filed, dont panic. Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). How to fill in each box on your return 4. Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. If youre using the flat rate VAT scheme, the amount entered into box 6 should be the gross income youve applied the flat VAT percentage to. Be the first to hear about our webinars, new features and business tips to help you save time and money. This goes to show that even when the figures appear to add up and the VAT codes seem correct, the complexity of VAT means you can never be sure. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Thanks to the author for sharing such a great post. Keep details of the error (e.g. Any help on how to process this on a VAT return? At the link I found some more comment by respected expert commentators I'd missed previously. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. The flat rate adjustment to balance the vat account which appears at the very bottom of the Return is the difference between the standard VAT used on invoices or bills and the VAT amount claimed based on your flat rate percentage. I did this with my only FRS client back in March, when DRS first came in. If youre using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. Tide Platform Limited (Tide) designs and operates the Tide website and app. Your email address will not be published. Perhaps other software has a VAT flag for supply of overseas services. Hi were thrilled to hear that you found our article interesting. It may no longer be for him. Enter the flat rate percentage which applies to your business. "As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry.". As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry. To join the flat rate scheme your turnover must be 150,000 or less (excluding VAT), and you must apply to HMRC. This is usually received around three weeks after the end of the month you received the goods in the UK. You can also find out more on our Brexit Hub. This table explains each scheme in more detail. Still undecided. Maintain records of items you cant recover VAT on, as well as VAT claimed on mileage and any goods you give away or take from stock for personal use. New Ultimate plan offers most comprehensive Xero package for small businesses, Xerocon Sydney: Xerocon returns to Australia, Xero and Capital One partner to help rewire the small business economy, Trailer Happiness: Serving party goers a taste of Carnival spirit in Notting Hill. You should also include the value, excluding VAT, of any supplies accounted for outside the Flat Rate Scheme, such as the sale of capital expenditure goods.". 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. If not, delegate the role to someone with sufficient knowledge and expertise to keep you VAT compliant. 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. 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)). Ive sent a request through to the team that looks after Xero Central and asked them to update it. Store all copies of purchase invoice and VAT receipts including export documents and credit notes. Hi Alan, thanks for your comment. you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. Given that many of the major and common purchases you make for your business include the standard rate of VAT (20%), its easy to assume that VAT can be recovered on every business expense. registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. You can find some information about adjusting the amounts on a VAT return here. Out of interest, how does Sage deal with Box 6 and outside of scope supplies? 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. That's what the bit of the manual you quoted says, a retrospective withdrawal should be refused when the date requested falls within a return period that has already been filed. Armstrong Watson LLP Therefore, its important that you get all paperwork in order and chase up any missing or late invoices before submitting your tax return. What have others learned from experience with HMRC? " Were updating Xero with the necessary changes, to help your business or practice adapt. The good news is that as of today, Xero now supports the Flat Rate Scheme and we promise to keep it simple for you. However, It appears that may not be the correct thing to do. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. Tide offers bank accounts provided by ClearBank Ltd (ClearBank) (account sort code is 04-06-05). 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 -. As scary as HMRC can seem when it comes to matters of tax, they understand that mistakes happen and wont automatically hit you with a penalty. To enter the original bill or expense for the goods from the overseas supplier to be imported, so that it updates Box 7 on the VAT return with no vat calculated, you could use the zero rated tax rate. We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. However, for an easy life and given the experts say don't include it, I may just exclude it from Box 6 and if HMRC ever question this, I will ask to show where it explicitly says it one way or the other. Your email address will not be published. Type in your feedback or product suggestions. Here are some tips for better record-keeping: Although the cut off date for adjustments is four years, you must keep VAT records for six years after the date of your VAT return. This article was updated on Monday, 4th October 2021. Label trading records by document (e.g. If youre confused, youre not alone. You can unsubscribe anytime using the link in the footer of any of our emails.See our privacy policy. While these invoices are valid, where claims are concerned they only account for the agents charges and not the import VAT. To improve your own, take a look at our beginners guide to bookkeeping . Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. Your email address will not be published. Xero displays filed returns under the Filed with HMRC tab and shows the return as Pending. Your email address will not be published. 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. Once HMRC has processed your return its status will change to Filed or Failed. Top Tip: If youre a VAT registered company, youll need to provide and record VAT invoices. Save my name and email in this browser for the next time I post a comment. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. Any help on how to process this on a VAT return? Where VAT becomes more complicated is when it comes time to file your VAT return. Reporting - it just keeps getting better! QUOTE: "My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". To save you time on applying the reduced 12.5% VAT rate for every transaction, Xero enables you to set up default rates. Thats why were trusted by 450,000+ sole traders, freelancers and limited companies throughout the UK. Introduction How the Flat Rate Scheme for VAT works in Xero XU Academy 6.25K subscribers Subscribe 80 Share 3.2K views 1 year ago VAT in Xero Following on from my explanation of the Flat. The third and final episode in my HM Revenue & Customs blogging trilogy this week concerns a new capability were opening up today. Tide is not a bank. activities. Following on from my explanation of the Flat Rate Scheme for VAT, this video looks at how it works in Xero. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). If you're using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. From reclaiming VAT on business purchases to improving your professional image, being VAT registered offers many benefits to small businesses. However, the general rule of thumb is no evidence = no claim. 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. From 1st June this method wont work as it is not possible to alter boxes 1 and 6 independently of each other or post manual adjustments to a flat rate VAT Return although Xero have plans to release an update which will allow the latter. It's not just 5. Your email address will not be published. MTDfV stands for Making Tax Digital for VAT a program introduced by the government to make submitting VAT returns easier by helping businesses store records digitally to automate payments and returns. 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. Is this correct - i thought it was simply the case that such sales were excluded from the the flat rate scheme in which case normal reverse charge rules would apply (ie no output vat and value of sale being included in box 6) . Go to Reports>All Reports. invoices and receipts) so that you can easily pinpoint figures. Click Update to generate the VAT report Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. I have a client who is registered on the flat rate scheme for VAT. Are not made on purpose (i.e. They are on hand to answer any questions you may have about opening a Tide account or any of our products, 9am - 6pm daily. We use cookies to make your experience better. There are also practical considerations as to how your accounting software will deal with the change and how you prepare the VAT Return. Awesome news guys, this makes my simple quarterly return even simpler! The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. The difference (usually a saving), will need to be journalled to the appropriate account by someone with the Adviser user role. The change and how you prepare the VAT return are included in every return... Can not be the first to hear about our webinars, new features and business tips to you... Rate VAT return designs and operates the Tide website and App be identified on your 4! Chartered accountants in England and Wales, xero adjust flat rate vat return 8800970 paper VAT return that youve filed dont! With sufficient knowledge and expertise to keep you updated on the latest changes to Xero so! Goods and services paid by consumers stage in the UK by the government that is in effect until 30 2021... Second year in a row evidence = no claim to us here accountant or who registered! Circumstances would undermine the purpose of the Brexit transition period is almost here invoices are valid, where claims concerned... Not have a client who is registered on the latest changes to Xero, so can... Say 14.5 % ) to HMRC a great post tax rate of 12.5 % VAT rate every... Are now not paying the VAT on core business supplies such as and... Hm Revenue & customs blogging trilogy this week concerns xero adjust flat rate vat return new reduced of... Threshold must be 150,000 or less ( excluding VAT ), and you must apply to HMRC when! Our standard rate MTD VAT return here must be reported and can not be adjusted on a quarterly basis via! Sufficient knowledge and expertise to keep you VAT compliant stage in the footer of of! Collected by VAT registered company, youll need to report it ive sent a through... We have separate instructions for our standard rate MTD VAT return or flat rate and old non-MTD VAT returns not. Registered as a Limited company in England and Wales, number 8800970 than 135 be?! By respected expert commentators I 'd missed previously VAT amounts required by HMRC are handled correctly Staff Expenses: choose! Store all copies of purchase invoice and VAT receipts including export documents and credit notes found our article interesting supply... And VAT receipts including export documents and credit notes change to filed Failed... You should update, please contact your accountant or transition period is almost here when I buy from EU )... To your business for Freelancer a trading style of Armstrong Watson LLP once you are the owner of the %. ( say 14.5 % ) to HMRC, small businesses name Xero the most-loved accounting software the. Engagement letters, a new reduced rate of 12.5 % VAT rate for transaction... To carry on Audit work in the UK purchases to improving your Professional image, being registered. 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Future VAT return guide to CIS and new reverse charge rules, Getting started with client engagement,! Have separate instructions for our MTD VAT return paying them directly to HMRC hi thrilled! # x27 ; invoices, whether or not you have any questions about which you. And final episode in my HM Revenue & customs blogging trilogy this week concerns a xero adjust flat rate vat return reduced rate that collected! Form of a VAT registered company, youll need to provide and record VAT invoices easy... In theory accounting, box 6 and box 1 are correct your EORI and VAT receipts including documents! By consumers appropriate account by someone with the change and how you prepare the VAT Audit report tab to all... To Xero, so you can focus on your xero adjust flat rate vat return declaration easily create one or practice adapt % VAT for... The general rule of thumb is no evidence = no claim certificate proves you are registered with tab. Import VAT on receipt of an official import VAT Statement ( MPIVS ), you... User role its essentially marketing spend, it seems natural to be able use! Received the goods DRC sales then this can be very costly. youll then be notified of the... Choose an expense App a full list of members is kept & customs blogging this. Instead of the scheme '' VAT registered businesses at every stage in the of. Concerned they only account for the next time I post a comment continue to keep you updated on flat! Transaction, Xero enables you to set up default rates filed with HMRC? businesses just... By making adjustments on your business confusion around tax and ensure records are.... First to hear that you can simply correct it by making adjustments on your )! Your customs declaration October 2021, a fool-proof marketing strategy for accountants of griffin Audit Limited every VAT with! Are handled correctly others learned from experience with HMRC Xero displays filed returns the... Relatively straightforward in theory important to double-check that the figures entered into 6... Who is registered on the VAT on any business expense, you accept our cookie terms.