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 have any questions or need support, dont hesitate to reach out to our support team who are available 24/7. 8. 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. So its cool that Xero now supports it. Firm The Hi Gary, small businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS. To save you time on applying the reduced 12.5% VAT rate for every transaction, Xero enables you to set up default rates. To contact us, simply click the Help icon at the upper right hand corner of the screen while youre logged into Xero. Here you pay VAT on your sales whether or not your customers have paid. 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. By subscribing you agree to receive marketing communications from Tide. You can also check out our support article for more information about creating and accessing your cases. 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. An exchange in the Xero forum revived the old "do you /don't you include" in box 6 of a flat rate scheme return (FRS) for non EC outside the scope supplies. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. 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. If youre confused, youre not alone. 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. The difference (usually a saving), will need to be journalled to the appropriate account by someone with the Adviser user role. I'll be happy to help. Thanks! Do I need to charge VAT to client for Freelancer? I did this with my only FRS client back in March, when DRS first came in. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). 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. Your email address will not be published. For the UK, theHMRCs FlatRate Scheme (FRS) for VAT is a beautifully simple scheme for businesses who dont have an accounting system, but a beautifully complicated scheme for businesses who do have an accounting system and want to take advantage of its benefits. All rights reserved. VAT, or value-added tax, is relatively straightforward in theory. You have clicked a link to a site outside of the QuickBooks or ProFile Communities. If youre using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. ". The links you have provided are all for QB Online. Are not made on purpose (i.e. not a deliberate error). We use cookies to make your experience better. Notice 733, section 7.5 in relation to box 6states: "Enter the turnover to which you applied the FRS percentage, including VAT. 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. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. describe a member of Armstrong Watson LLP or an employee of Armstrong Watson LLP in their capacity as such. 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!! You must ensure the settings are correctly set up in Xero, so it knows that youre using the flat rate scheme. In this post, were going to take you through the most common VAT return errors to help you complete your returns accurately and show you what to do if you end up making a mistake. So using the principal of not looking for something that's not there, and relying on plain English, written for the business owner, I find 6.2 & 6.3 of 733 and 4.1 of 700/12 in harmony. Thanks for the reply. If there are significant DRC sales then this can be very costly. Top Tip: Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your cash flow and evaluate your success. But the rule has another side that often goes overlooked: you cant claim bad debt relief until after six months from the due date. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. ****** 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 Tide Platform Limited (Tide) designs and operates the Tide website and app. Box 1 would then show 5,000. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. Explanation of some common VAT terms 3. 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. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. for more information about creating and accessing your cases. From 1st June 2022 businesses using the flat rate scheme for VAT face changes to the way in which they must treat import VAT that will have financial and practical implications for how they prepare VAT Returns. Hi Roxanne, thank you very much for bringing this to our attention. In standard VAT reporting, outside the scope services are included in Box 6. Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. Click Update to generate the VAT report You are responsible for telling the government exactly how much VAT you charged to customers (known as output tax) as well as how much VAT you were charged by suppliers (known as input tax). Make sure to highlight every new or unusual transaction so that you can be sure that its given the correct treatment. 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. reference number 542122. To do this go to Settings>General Settings>Financial Settings. With the ongoing situation around COVID-19 and Britains withdrawal from the EU (Brexit), as well as HMRCs drive towards making VAT easier for VAT-registered companies, theres likely to be new rules and regulations to come. Tide is about doing what you love. 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 . The VAT Flat Rate Scheme. 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. At the link I found some more comment by respected expert commentators I'd missed previously. Find out what else you may be entitled to in our guide to reimbursable expenses and how you can claim them . All you need to do is write to VAT and let them know. All rights reserved. You may wish to change the following areas: If you have any questions about which areas you should update, please contact your accountant or Xero support. Hold off on any claim until the C79 certificate proves you are the owner of the goods. QUOTE: "My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". 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. Viciuno Unless otherwise indicated, either expressly or by the context, we use the word partner to If youve made a genuine mistake on a VAT return that youve filed, dont panic. Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks. All Rights Reserved. Hi Astra, thanks so much for getting in touch. PVA is quite a complex topic. Thanks to the author for sharing such a great post. The exception will notify HMRC that the transaction has been accounted for within the current period but refers to a previously filed period. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. The good news is that as of today, Xero now supports the Flat Rate Scheme and we promise to keep it simple for you. 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 ; ). Once you are registered with HMRC, they will give you a rate. If you do not have a tax rate of 12.5%, you can easily create one. 2023 Xero Limited. Filling in the return if you use a VAT Accounting Scheme 5. Business Tax Account 6.. 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. 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. Griffin is the trading name of Griffin Audit Limited. We use cookies to make your experience better. See below, or. Armstrong Watson Financial Planning & Wealth Management is a To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. The most common mistake made with import VAT is reclaiming VAT on receipt of invoices from shipping agents. This includes: Another common mistake made by businesses is recovering VAT on deposits instead of waiting until the full balance has been received. 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. Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). 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. Flat rate and old non-MTD VAT Returns will not have PVA functionality. By keeping your finances in order and all VAT related paperwork organised, mistakes can easily be rectified on future returns. Some purchases, such as the selling, leasing and letting of commercial land and buildings and subscriptions to membership organisations, are VAT exempt and therefore cannot be added to a VAT return. 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? e.g. 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. Registered as a limited company in England and Wales, number 7208672. MTDfV-compatible software can be bridging software like Tides VAT Manager or software that lets you submit VAT returns without the need to visit the HMRC website. Are you aware of this fact - ie the 16.5% is clauclated on gross vat inclusive sales not net sales. Accountants in England and Wales. Get up to speed on what information you must include on your VAT invoice . 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. 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? Tide is also authorised and regulated by the Financial Conduct Authority in relation to its credit and insurance broking activities (firm reference 718743). You can correct errors on any VAT return that relates to an accounting period that ended within the last four years if they: Making an adjustment is a straightforward process that you can do in one of two ways: For example, lets say a small business owner called Rachel is VAT registered under the standard VAT scheme and submits VAT returns every quarter. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. Top Tip: Making Tax Digital is designed to reduce the risk of human error in VAT and tax returns. In most cases, providing the error meets HMRCs conditions, you dont need to report it. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. Check out our guide to VAT rules and rates on exports . 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. Tip We have separate instructions for our standard rate MTD VAT return and non-MTD VAT return. By using xero.com, you accept our cookie notice terms. He may well need to leave the FRS. Your chosen VAT scheme also affects how to report that VAT on your VAT return (namely whether to report gross or net income) as well as how often you can reclaim your input tax. Where errors creep is when non-standard supplies are added. Apply a Postponed VAT Accounting (PVA) adjustment. A number of the VAT mistakes weve covered in this post come from poorly maintained records. To manage this change, HMRC has established a new process called Postponed VAT Accounting (PVA). You can find some information about adjusting the amounts on a VAT return here. The issuer of your Tide card will be identified on your monthly card statement. Ta all. (PVA). 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. According to a survey commissioned by Intuit QuickBooks, small UK business owners spend an average of 86 minutes checking their figures before submitting their VAT return to HMRC. Where VAT becomes more complicated is when it comes time to file your VAT return. By using xero.com, you accept our cookie notice terms. 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. For example, if you buy a laptop to split between home and work, you can calculate what portion of the purchase is business-related and reclaim VAT. However, reaping the rewards whilst staying VAT compliant relies on you completing accurate VAT returns a task that isnt always straightforward. 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. PVA gives you the option to account for and recover VAT on your imported goods using the same VAT Return form. 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. Personal expenses are exempt too, although you may be able to claim a proportion of the VAT back on an item that has dual business and personal use. 10.8.1 Flat Rate Scheme How to avoid and rectify common VAT mistakes, 9 common VAT return mistakes made by small businesses, VAT exempt (or qualify for partial exemption), reimbursable expenses and how you can claim them, what information you must include on your VAT invoice, the VAT threshold and when should you register for VAT, choosing an accountant for your small business, integrate seamlessly with your Tide account, what Making Tax Digital means for your small business, A quick guide to VAT when youre self-employed, Voluntarily register for Standard Rate VAT, Register for Standard Rate VAT or Flat Rate VAT, Register for Standard Rate VAT, Flat Rate VAT, Cash accounting scheme or Annual accounting scheme. 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. Reporting - it just keeps getting better! Xero will then populate your VAT Return automatically. Unfortunately, only 50% of the VAT charged on a lease car is recoverable and youll need to support your claim with your suppliers invoice. 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. The 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. You'll need to make sure you include your EORI and VAT registration number on your customs declaration. 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 . Value-Added tax, is relatively straightforward in theory up to speed on information! Rate scheme PVA ) adjustment We have separate instructions for our standard rate MTD return. ; ll need to report it saving ), will need to make them as easy as for! Your income net of VAT, or value-added tax, is relatively straightforward in theory in box 6 are! Imported goods using the flat rate and old non-MTD VAT return and non-MTD returns! You must include on your behalf ) of this fact - ie the 16.5 % is clauclated gross! Recovering VAT on his invoices and self-billing agreements ( invoices prepared by the customer on VAT! In box 6 DRS first came in value-added tax, is relatively in. 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Sometimes save a few thousand pounds each year using FRS in order and all VAT paperwork! Here to make sure to highlight every new or unusual transaction so that you can some.
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