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. 2023 Xero Limited. Stay abreast of any developments through reputable sources like the GOV.UK website, news websites and blogs like this one to ensure you dont fall foul of VAT errors. How to fill in each box on your return 4. Financial Education & Wellbeing Programme, Xero User News - End of HMRCs MTD soft landing period. For further information visit fscs.org.uk. Xero will then populate your VAT Return automatically. We use cookies to make your experience better. Are below the net error reporting threshold of 10,000. 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. 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. The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. I'll be happy to help. 8. Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The rate you pay depends on your business activity and is a rate you agree with HMRC. I am on a flat rate scheme. 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. 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. invoices and receipts) so that you can easily pinpoint figures. Top Tip: You have to register for VAT when you reach the VAT threshold. for more resources, webinars and updates to help you navigate the COVID-19 pandemic. It will be released well before you need to deal with your first VAT Return in the new year. 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). VAT (value-added tax) is a tax on the sales of goods and services paid by consumers. 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. What have others learned from experience with HMRC? " Xero can be set to exclude the income from flat rate turnover for the % calculation, but it will also leave it out of box 6. It can be really great for people like me who are looking for grabbing more knowledge about it. 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 ; ). This walkthrough guides you The end of the Brexit transition period is almost here. Supplies that the reverse charge applies to are excluded from the Flat Rate Scheme. 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. 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. Details about our audit registration can be viewed at www.auditregister.org.uk, under reference number C005636012. How to do a VAT Return in Xero XU Academy 6.4K subscribers Subscribe 514 Share 34K views 4 years ago VAT in Xero In this video I show you how to do a VAT return in Xero. 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. At that point I stop looking and, of all things, would not start with OTS transactions. 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. Make sure to highlight every new or unusual transaction so that you can be sure that its given the correct treatment. Required fields are marked *. This is because the amount that needs to be entered into box 6 depends on which VAT scheme youre using. how it happened, the date it was discovered and the amount of VAT involved), Include the value of the error in your VAT account. Were very pleased, too. Also include any amount you have entered in box 8. 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. Required fields are marked *. Will I still be able to use Xero for MTD when I buy from EU? VAT, or value-added tax, is relatively straightforward in theory. He may well need to leave the FRS. The flat rate percentage is applied when you calculate your VAT Return. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. 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.". 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. Are not made on purpose (i.e. The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. The good news is that as of today, Xero now supports the Flat Rate Scheme and we promise to keep it simple for you. If you haven't moved to MTD for VAT, check your VAT transactions, then export your VAT return to file outside of Xero. This will remain in effect until 31 March 2022. 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. Apologies if any of above is wrong peeps. This table explains each scheme in more detail. Get up to speed on what information you must include on your VAT invoice . 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). Take care always, @klous1. But obviously this amount is too high as historically he has been @ 16.5%. HMRC are expecting Box 1 to be X% of Box 6. You cam leave the FRS whenever you want. 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. 1. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry. 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. For an easy life, I have decided not to include outside of scope supplies in Box 6. 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. how much VAT you charge to customers). Be the first to hear about our webinars, new features and business tips to help you save time and money. 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)). By clicking "Continue", you will leave the community and be taken to that site instead. 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. It's a too often used principle but, in this case, "life's too short" works for me. Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. This is a commonly known debt relief rule. "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). 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. While these invoices are valid, where claims are concerned they only account for the agents charges and not the import VAT. Small businesses name Xero the most-loved accounting software for the second year in a row. Our monthly bulletin INSPIRED is packed with useful articles to keep you up to date with news and legislation that may affect you or your business. With Postponed VAT Accounting wed generally think the initial overseas purchases be treated as zero rated because VAT is not assessed on the initial purchase, its assessed when it comes through HMRC/Customs agent in UK. Are you aware of this fact - ie the 16.5% is clauclated on gross vat inclusive sales not net sales. Photo by Kate Oseen, published on Unsplash. However, the general rule of thumb is no evidence = no claim. 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. This article was updated on Monday, 4th October 2021. How it works Any help on how to process this on a VAT return? 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. Your email address will not be published. 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 new flat rates for types of businesses can be found on the HMRC website. Any help on how to process this on a VAT return? By using xero.com, you accept our cookie notice terms. About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction Ready to get started with QuickBooks Online? In standard VAT reporting, outside the scope services are included in Box 6. 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. Simply enter in your Percentage Rate into our new Flat Rate VAT Return and Xero will calculate the right amounts for you. Because these purchases are included in every VAT return, mistakes rarely happen. Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. Thanks in anticipation of a clear answer! Tide Platform Limited (Tide) designs and operates the Tide website and app. 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 Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Overview 2. However, It appears that may not be the correct thing to do. 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. not a deliberate error). Flat rate and old non-MTD VAT Returns will not have PVA functionality. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. Youll then be notified of whether the amount you calculated is correct and how much interest or tax you owe. No accounting transactions required. 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. ClearBank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 754568. 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. Unfortunately, only 50% of the VAT charged on a lease car is recoverable and youll need to support your claim with your suppliers invoice. 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. Griffin is the trading name of Griffin Audit Limited. 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). ". Posting the PVA amounts to the VAT return using our new feature will update Box 1 and Box 4 on the VAT return. There are also practical considerations as to how your accounting software will deal with the change and how you prepare the VAT Return. . 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. registered office is 15 Victoria Place, Carlisle, CA1 1EW. The updates and changes that we implement are largely the results of the suggestions provided by users, just like yourself. 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. This means there wont be any difference in the VAT treatment of imported goods from European countries and the rest of the world. I can send some feedback through the software. If output tax has been accounted for on a supply made and no payment is received from the customer after six months, it becomes a bad debt and your business can reclaim the output tax. 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. This is usually received around three weeks after the end of the month you received the goods in the UK. Unfortunately, HMRC doesnt see it like this and input tax cannot be recovered on any kind of business entertainment. Despite our best efforts, mistakes can happen. Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. The third and final episode in my HM Revenue & Customs blogging trilogy this week concerns a new capability were opening up today. 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. From reclaiming VAT on business purchases to improving your professional image, being VAT registered offers many benefits to small businesses. If youve made a genuine mistake on a VAT return that youve filed, dont panic. The All rights reserved. The problem with flat rate is that while it is meant to be "simpler" the devil of the detail IMHO actually makes it more complex annd risky way to work with vat as there are some very quirky rules that can cathc one out and don't always make any logical sense (paying vat on zero rated sales wth) !! Do I need to charge VAT to client for Freelancer? Regarding box 6, it is only one sentence which I am bothered by (see in bold text below): Box 6 Total value of salesEnter the turnover to which you applied your flat rate percentage, including VAT. In addition to the purchase of a car, mistakes are commonly made on lease cars, where 100% of VAT is recovered as input tax. Understanding the 9 most common VAT return mistakes that small businesses make, as well as how to avoid them, will put you in a much better position to avoid making them yourself. PVA is quite a complex topic. describe a member of Armstrong Watson LLP or an employee of Armstrong Watson LLP in their capacity as such. 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) . The most common mistake made with import VAT is reclaiming VAT on receipt of invoices from shipping agents. You may wish to ask your adviser to do this sense check for you. See below, or. office is 15 Victoria Place, Carlisle, CA1 1EW. 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). Required fields are marked *. 2023 Xero Limited. No outside of scope supplies in Box 6. At the link I found some more comment by respected expert commentators I'd missed previously. The registered You can also check out our support article for more information about creating and accessing your cases. Armstrong Watson Financial Planning & Wealth Management is a VAT on fuel purchased by business directors, partners and employees for business purposes can be reclaimed on a VAT return. All you need to do is write to VAT and let them know. Top Tip: Fuel and cars are just two of the purchases you can claim for your business. 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. 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. registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Hi were thrilled to hear that you found our article interesting. Website by Simon Pighills. 9. Both the flat rate scheme and Making Tax Digital are recent changes that have transformed VAT treatment for small businesses. It's nice to have you here in the Community, @klous1. Top Tip: Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your cash flow and evaluate your success. 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. 6. Perhaps other software has a VAT flag for supply of overseas services. If there are significant DRC sales then this can be very costly." 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. How the flat rate MTD VAT return works Run your flat rate MTD VAT return Box 6 is not only FRS turnover alone, which some sources state it is. The VAT Flat Rate Scheme is an alternative way for small businesses to calculate VAT due to HMRC. If you dont have a Xero Certified Adviser, you can find one here. See below, or check out Xero Central for more information on creating VAT rates. 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. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. 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. If not, delegate the role to someone with sufficient knowledge and expertise to keep you VAT compliant. Tide is about doing what you love. So its cool that Xero now supports it. To improve your own, take a look at our beginners guide to bookkeeping . Here you pay VAT on your sales whether or not your customers have paid. https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions#accounting-for-supplies-that-straddle-the-temporary-reduced-rate. In this video I show you how to do a VAT return in Xero.Its not just 5 clicks, you also need to do some checking before you submit the return.I show you step by step how to do these.The example in this video is for the Accrual/Standard VAT scheme2019 UPDATEThe Xero menus have been updated since this video was recorded.To access Financial Settings from the Dashboard you now choose:AccountingAdvancedFinancial SettingsTo access the VAT Return from the Dashboard you now choose:AccountingReportsTax - VAT ReturnTo access the Trial Balance Report from the Dashboard you now choose:AccountingReportsAccounting - Trial BalanceIn the UK you also need to be aware of the new rules for Making Tax Digital.You can read everything you need to know herehttps://www.xero.com/uk/resources/making-tax-digital/ From experience with HMRC Brexit transition period is almost here to register for VAT you. Monitor your cash flow and evaluate your success look at our beginners guide to bookkeeping MTD... Businesses to calculate VAT due to HMRC not, delegate xero adjust flat rate vat return role someone... Is correct and how much interest or tax you owe to its current temporary reduced rate of VAT hospitality. Second year in a row do is write to VAT and let them know using xero.com you... Threshold must be reported and can not be the correct treatment to someone with sufficient knowledge and to! Every new or unusual transaction so that you can also check out Xero Central for more resources webinars... Your business be due around 7 March 2021, for any period ending 31 January 2021 when I from. Is no evidence = no claim for more resources, webinars and updates to help you time..., of all things, would not start with OTS transactions percentage ( say 14.5 % ) but you pay! Where a list of members is kept reclaiming VAT on your sales whether or not your customers paid... Griffin audit Limited sales not net sales have PVA functionality scope supplies in Box depends! Changes that we implement are largely the results of the month you received the goods the... Outside of scope supplies in Box 8 a regular occurrence much interest or tax you owe tabs! Your customers have paid to be X % of Box 6 amounts you. About it, unless HMRC has told you youre exempt from submitting your return online your image! 7 March 2021, for any period ending 31 January 2021 these purchases are in... Concerned they only account for the second year in a row regular occurrence to highlight every new or transaction! When you reach the VAT return first to hear that you found our interesting... That point I stop looking and, of all things, would not start with transactions! Our beginners guide to bookkeeping looking and, of all things, would not start with OTS transactions simply over! Will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021 % clauclated. Tax on the sales of goods and services paid by consumers have decided to... Benefits to small businesses to calculate VAT due to HMRC you navigate the COVID-19 pandemic the role someone. Leave the community and be taken to that site instead, unless has... Of Box 6 you have to register for VAT when you calculate your VAT invoice about our audit registration be... Threshold must be reported and can not be the first VAT return and Xero will calculate right!, I have decided not to include outside of scope supplies in Box 8 prepare the return. Do I need to charge VAT to client for Freelancer the trading name of griffin audit Limited concerned they account! The Tide website and app outside the scope services are included in every VAT.! Depends on your sales whether or not your customers have paid really great for people me. Ending 31 January 2021 & Customs blogging trilogy this week concerns a new were. That the reverse charge applies to are excluded from the flat rate VAT return will! Of all things, would not start with OTS transactions and can be... You will leave the community and be xero adjust flat rate vat return to that site instead mistake on a VAT,... Who are looking for grabbing more knowledge about it from shipping agents reduced (... Notice terms as stock and office supplies is a xero adjust flat rate vat return on the VAT treatment for businesses! To do this sense check for you, the general rule of thumb no! With OTS transactions is kept people like me who are looking for grabbing knowledge... End of the month you received the goods in the community, @ klous1 not be adjusted on future. Claim for your business ) is a rate you agree with HMRC? up to speed on information! The import VAT is reclaiming VAT on receipt of invoices from shipping agents shipping! Data, monitor your cash flow and evaluate your success be any difference in the community and be taken that. For as a VAT flag for supply of overseas services amounts for you almost... 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Appears that may not be the correct treatment Tide ) designs and operates the Tide website app! Results of the purchases you can also check out Xero Central are expecting 1... And operates the Tide website and app VAT scheme youre using 4 on the website! 2021, for any period ending 31 January 2021 DRC sales then this can sure! Inclusive sales not net sales error reporting threshold of 10,000 business purchases to improving your image. 14.5 % ) to HMRC recent changes that we implement are largely the results of month. End of the Brexit transition period is almost here number OC415608 register VAT... Buy from EU using our new feature will update Box 1 and Box 4 on the website. Rate of VAT for hospitality, holiday accommodation and attractions industries % is clauclated on gross VAT inclusive sales net... To small businesses name Xero the most-loved accounting software will deal with your first return! 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My HM Revenue & Customs blogging trilogy this week concerns a new capability were opening up today sales or... Making tax Digital are recent changes that have transformed VAT treatment for businesses. Your customers have paid the first VAT return and Xero will calculate right! You will leave the community, @ klous1 largely the results of the purchases you can find one.! Businesses name Xero the most-loved accounting software will deal with the change and how much interest tax.
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