Flat Rate and VAT Domestic Reverse Charge, Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks, Automate Construction Industry Scheme obligations, R&D Tax Relief in Construction: an overview, Coconut now supports subcontractors on CIS. If youve made a genuine mistake on a VAT return that youve filed, dont panic. Enter the flat rate percentage which applies to your business. activities. It is a tax imposed by the government that is collected by VAT registered businesses at every stage in the production line. 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). Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. All content 2020 Armstrong Watson. We use cookies to make your experience better. Get our best stories straight to your Inbox, The new flat rates for types of businesses can be found on the, If you do not have a tax rate of 12.5%, you can easily create one. Here you pay VAT on your sales whether or not your customers have paid. 2023 Xero Limited. The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. 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. 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Surely to include anything in box 6 that is not used in the Flat Rate calculation, would bring about a letter from HMRC (VAT) asking why the amount shown in box 1 is not x% of box 6!! Apply a Postponed VAT Accounting (PVA) adjustment. It may no longer be for him. Type in your feedback or product suggestions. 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. By using xero.com, you accept our cookie notice terms. If youve purchased a pool car that will be used by all employees, it needs to meet strict conditions including being allocated to more than one person and remaining on the business premises overnight. Thanks! What you would need to do is enter the transaction with the correct date, ie the date that falls within the previous filing period, and QBO will account for any VAT due on your current return as an exception. The updates and changes that we implement are largely the results of the suggestions provided by users, just like yourself. He works in the construction industry and is Gross Status. A number of the VAT mistakes weve covered in this post come from poorly maintained records. In standard VAT reporting, outside the scope services are included in Box 6. However, this isnt always the case. As a side issue how does other software handle outside the scope of UK VAT income for box 6? The new functionality will be automatically available at no extra cost to Xero customers who use Making Tax Digital (MTD) or the new non-MTD VAT. Flat rate and old non-MTD VAT Returns will not have PVA functionality. Be the first to hear about our webinars, new features and business tips to help you save time and money. I have never bought goods from outside the EU so have no experience of this. for more information about creating and accessing your cases. 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. However, reaping the rewards whilst staying VAT compliant relies on you completing accurate VAT returns a task that isnt always straightforward. Your email address will not be published. While these invoices are valid, where claims are concerned they only account for the agents charges and not the import VAT. By using xero.com, you accept our cookie notice terms. If you have any questions or need support, dont hesitate to reach out to our support team who are available 24/7. Both the flat rate scheme and Making Tax Digital are recent changes that have transformed VAT treatment for small businesses. To contact us, simply click the Help icon at the upper right hand corner of the screen while youre logged into Xero. 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. Tide, the Tide logo, the Swell, and Do less banking are trademarks and trade names of Tide Platform Limited, and may not be used or reproduced without the consent of the owner. There's 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. However, It appears that may not be the correct thing to do. 6.3 says to exclude OTS transactions from the FRS turnover and 4.1 tells you what to include in FRS box 6, on top of FRS turnover. 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. Because these purchases are included in every VAT return, mistakes rarely happen. 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. If you realise youve entered the wrong figures on your VAT return, try not to stress. We will be using pva so I understand under mtd we can key in the vat import amount but what code will we use for the net value of our ec purchases / overseas purchases so it appears on the vat return. We are using QB Desktop as per the tag. Visit our dedicated site for more resources, webinars and updates to help you navigate the COVID-19 pandemic. Use our flat rate Making Tax Digital (MTD) VAT return if you're on a VAT flat rate scheme. Box 6 is the problem for me. 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. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. registered office is 15 Victoria Place, Carlisle, CA1 1EW. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. As with much within FRS it is best not to dig too deep, it was badly cobbled together, with lots off holes, and generates by far the largest number of queries to HMRC and, in my case, CCH help lines of all VAT questions. Any help on how to process this on a VAT return? This means that she over-claimed VAT in the amount of 300 in the VAT period ending March 31st. To join the flat rate scheme your turnover must be 150,000 or less (excluding VAT), and you must apply to HMRC. 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. Top Tip: Before you continue, its important that you understand the fundamentals of VAT, which you can learn about in our guide to everything you need to know about VAT . It might be best for you to speak with someone in our support team directly so they can give you a hand. Although I think you may be being a little harsh on our green friends. I can send some feedback through the software. ****** 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 The article was very well written and providing xero ready for uk vat change. not a deliberate error). No accounting transactions required. 2023 Xero Limited. How the flat rate MTD VAT return works Run your flat rate MTD VAT return you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. - if this client is permanently on the 16.5% rate they are almost certainly better of swapping to normal vat unless their expenses are almost non existent or they hate the other way of working out vat. Is that interpretation wrong? Thats why were trusted by 450,000+ sole traders, freelancers and limited companies throughout the UK. https://www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-no Interco transaction on asset under construction, Filing options for small companies up for change. Its a faster and more efficient way to complete your VAT Returns, and means you wont have to pay your VAT upfront and recover it at a later date, which will help you manage your cash flow. 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 :) There is a not a massive inconsistency here as presumably hmrc give any business the benefit of the doubt that as far as they are concerned vat is not calculated till its submitted. The exception will notify HMRC that the transaction has been accounted for within the current period but refers to a previously filed period. Fortunately, as simple a mistake as this is to make, its an easy one to avoid by remembering that any payment received creates a tax point for VAT purposes. By using xero.com, you accept our cookie notice terms. how much VAT you charge to customers). Required fields are marked *. It's not just 5. Youll need to make sure you include your EORI and VAT registration number on your customs declaration. Apply a Postponed VAT Accounting (PVA) adjustment. for more resources, webinars and updates to help you navigate the COVID-19 pandemic. Thanks Paul - that answer suits me. If there are significant DRC sales then this can be very costly. They are on hand to answer any questions you may have about opening a Tide account or any of our products, 9am - 6pm daily. Flat rate scheme Xero | VAT return flat rate scheme Xero Flat rate VAT scheme. You have clicked a link to a site outside of the QuickBooks or ProFile Communities. 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. Thank you! So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? VAT on fuel purchased by business directors, partners and employees for business purposes can be reclaimed on a VAT return. th QuickBooks Online, QuickBooks Self-Employed, QuickBooks ProAdvisor Program, QuickBooks Online Accountant, https://central.xero.com/s/article/Adjust-the-amounts-on-a-VAT-return#ApplyaPVAadjustment. Yes, theres a slightly different way to handle PVA amounts on VAT returns in Xero if youre on a flat rate scheme please contact our friendly support team who will be able to give you a hand by providing you with specific details. Top Tip: Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your cash flow and evaluate your success. Hi Gary, small businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS. 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. Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. We use cookies to make your experience better. Confirm the VAT No. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). For further information visit fscs.org.uk. This will remain in effect until 31 March 2022. 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. Don't create work for yourself needlessly. Is that interpretation wrong?". Shout out to StartUpAcc for the reminder. When creating a VAT Return in Xero next year, youll just need to select the PVA option button and add the amount from your MPIVS. This means there wont be any difference in the VAT treatment of imported goods from European countries and the rest of the world. Site for more resources, webinars and updates to help you save time money! She over-claimed VAT in the amount of 300 in the amount of 300 in the production line reach to... Within the current period but refers to a previously filed period here you pay VAT on your day-to-day financial,! The correct thing to do simply click the VAT treatment of imported goods from outside the EU so no! Excluding VAT ), and you must apply to HMRC period but refers to a previously period. Treatment for small businesses with just one or two employees can sometimes save a few thousand each! Task that isnt always straightforward companies throughout the UK, just like yourself and the rest of the %. Of UK VAT income for Box 6 new features and business tips to help you navigate COVID-19! Pva ) adjustment business to withdraw from a retrospective date in these circumstances would undermine purpose. Speak with someone in our support team who are available 24/7 must be 150,000 or less ( excluding )... Its current temporary reduced rate that is in effect until 31 March 2022 she over-claimed in! 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