Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. Have you looked here for a Plain English guide? for more information on creating VAT rates. On my calcs if we take 5k net value of work done - gross value 6k the flat rate vat payable is 990 of the 1000 being billed - so leakage is only a tenner so i don;t see what the issue is here !! The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. Registered as a limited company in England and Wales, number 8800970. Do you have a question about self-assessment or anything else? No outside of scope supplies in Box 6. They will then pass on the VAT they collect to the government, typically on a quarterly basis, via a VAT Return. 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. All rights reserved. Filling in the return if you use a VAT Accounting Scheme 5. Business Tax Account 6.. Shout out toStartUpAccfor the reminder. You can find a full list of MTDfV software on the GOV.UK website. Monitor your VAT account in an accounting system. VAT on fuel purchased by business directors, partners and employees for business purposes can be reclaimed on a VAT return. "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). So its cool that Xero now supports it. Confirm the VAT No. Are you aware of this fact - ie the 16.5% is clauclated on gross vat inclusive sales not net sales. So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? ASE Professional Services is a trading style of Armstrong Watson Audit Limited and Armstrong Watson LLP. Thanks, Joanne. 4. Hi Teresa, thank you so much for getting in touch. Firm By subscribing you agree to receive marketing communications from Tide. 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. 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. 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. You have up to four years to put things right. Get up to speed on what information you must include on your VAT invoice . 10.8.1 Flat Rate Scheme Once you are registered with HMRC, they will give you a rate. 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. If you dont have a Xero Certified Adviser, you can find one here. 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. Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. Despite our best efforts, mistakes can happen. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. The most obvious choice being an accountant. By keeping your finances in order and all VAT related paperwork organised, mistakes can easily be rectified on future returns. "As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry.". Placing someone in charge of dealing with VAT day-to-day will help to avoid any confusion around tax and ensure records are consistent. Here you pay VAT on your sales whether or not your customers have paid. From 1 January 2021, controls will be placed on the movement of goods between the UK and the EU. By using xero.com, you accept our cookie notice terms. Both the flat rate scheme and Making Tax Digital are recent changes that have transformed VAT treatment for small businesses. Box 1 would then show 5,000. To contact us, simply click the Help icon at the upper right hand corner of the screen while youre logged into Xero. 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. 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. 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. Top Tip: If youre a VAT registered company, youll need to provide and record VAT invoices. Your email address will not be published. To learn more about the VAT threshold in the UK, read our guide to the VAT threshold and when should you register for VAT , If Annual accounting scheme:-Improves cash flow as you pay VAT less frequently (in monthly or quarterly instalments), If Annual accounting scheme:-Can only reclaim input tax once a year, which is damaging if you rely on cash from reclaiming VAT throughout the year. Your email address will not be published. It may no longer be for him. How the flat rate MTD VAT return works Run your flat rate MTD VAT return This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. If youre using the cash accounting scheme or the standard accounting scheme, box 6 should include your income net of VAT. you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. office is 15 Victoria Place, Carlisle, CA1 1EW. It might be best for you to speak with someone in our support team directly so they can give you a hand. But the rule has another side that often goes overlooked: you cant claim bad debt relief until after six months from the due date. Save my name and email in this browser for the next time I post a comment. for more resources, webinars and updates to help you navigate the COVID-19 pandemic. All Rights Reserved. 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 you do not have a tax rate of 12.5%, you can easily create one. Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". Still undecided. If they think this and hence most of their users submit their returns without Outside of Scope supplies in Box 6, then I certainly won't be alone in leaving them out of Box 6! 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. MyRetirement is a trading style of Armstrong Watson Financial Planning Limited. Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. trading About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction PPS is a trading name of Prepay Technologies Ltd which is an electronic money institution authorised by the FCA under the Electronic Money Regulations 2011 under firm reference number 900010 for the issuing of electronic money. Take care always, @klous1. Hi Astra, thanks so much for getting in touch. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. 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. 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. 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. Hi Gary, small businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS. Your email address will not be published. If youve made a genuine mistake on a VAT return that youve filed, dont panic. For example, if a VAT-registered business sells a widget for 1, they will charge the customer 1.20 (assuming the 20% rate applies). Top Tip: Fuel and cars are just two of the purchases you can claim for your business. Will I still be able to use Xero for MTD when I buy from EU? You may wish to ask your adviser to do this sense check for you. 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. The registered Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. This was very well advertised in the months leading up to introduction of the DRC. Supplies that the reverse charge applies to are excluded from the Flat Rate Scheme. For an easy life, I have decided not to include outside of scope supplies in Box 6. reference number 542122. Some of Tides members also hold e-money accounts provided by Prepay Solutions (PPS) (account sort code is 23-69-72). Featured Apps - Managing Staff Expenses: Why choose an expense App. Small businesses name Xero the most-loved accounting software for the second year in a row. Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). 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. If youre confused, youre not alone. Tide offers bank accounts provided by ClearBank Ltd (ClearBank) (account sort code is 04-06-05). 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. Get our best stories straight to your Inbox. To manage this change, HMRC has established a new process called Postponed VAT Accounting (PVA). 7. Ready to get started with QuickBooks Online? 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. To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. As a side issue how does other software handle outside the scope of UK VAT income for box 6? 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy. While these invoices are valid, where claims are concerned they only account for the agents charges and not the import VAT. If you are on the flat rate scheme for VAT, but not quite sure how to complete the return in Xero, this is the guide for you! Because these purchases are included in every VAT return, mistakes rarely happen. I did this with my only FRS client back in March, when DRS first came in. They are on hand to answer any questions you may have about opening a Tide account or any of our products, 9am - 6pm daily. Thanks! All content 2020 Armstrong Watson. Top Tip: You have to register for VAT when you reach the VAT threshold. How to fill in each box on your return 4. 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. 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 -. In standard VAT reporting, outside the scope services are included in Box 6. Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. Flat rate and old non-MTD VAT Returns will not have PVA functionality. 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. 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. Website by Simon Pighills. Xero will then populate your VAT Return automatically. I'll be happy to help. 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. Where errors creep is when non-standard supplies are added. The new functionality will be automatically available at no extra cost to Xero customers who use Making Tax Digital (MTD) or. You can't come off flat rate retrospectively as HMRC would see that as you trying to gain an advantage (ie, if you do a few months realise you're better off being on flat rate or normal VAT then if you could go back in time then you'd be better off and this is what HMRC don't like), so you can come off flat rate before filing the next return - for example if your Qtr was say Jul-Aug-Sept, you can change at start of July as you've not filed that return as yet and would make the Jul-Aug-Sept, so you could come off flat rate or join flat rate (depending on what scheme you're already on). Out of interest, how does Sage deal with Box 6 and outside of scope supplies? Just had a client investigated. This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. 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. 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. Hello,As you may have seen Xero have created a function to apply a PVA VAT adjustment:https://central.xero.com/s/article/Adjust-the-amounts-on-a-VAT-return#ApplyaPVAadjustmentPVA is quite a complex topic. As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry. activities. You can also find out more on our. Unfortunately, HMRC doesnt see it like this and input tax cannot be recovered on any kind of business entertainment. This means there wont be any difference in the VAT treatment of imported goods from European countries and the rest of the world. You must have JavaScript enabled to use this form. Box 1 would then show 5,000. By using xero.com, you accept our cookie notice terms. 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. Required fields are marked *. Do I need to charge VAT to client for Freelancer? Click the File VAT Now button at the bottom of your VAT Return. 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 ; ). - 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. If you can please raise a case here someone will get in touch with you to help answer your questions as clearly as possible. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Thank you so much for sharing your feedback with us. However, the general rule of thumb is no evidence = no claim. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. 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 Xero displays filed returns under the Filed with HMRC tab and shows the return as Pending. A number of the VAT mistakes weve covered in this post come from poorly maintained records. Transactions outside of regular trading patterns such as cash sales, property income, management charges or barter transactions can often be overlooked or given the wrong treatment, resulting in too little, too much or no VAT being reclaimed. Is that interpretation wrong?". HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. Awesome news guys, this makes my simple quarterly return even simpler! I am on a flat rate scheme. 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. Hold off on any claim until the C79 certificate proves you are the owner of the goods. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). 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. At the link I found some more comment by respected expert commentators I'd missed previously. To join the flat rate scheme your turnover must be 150,000 or less (excluding VAT), and you must apply to HMRC. PS: Clear Books follows the above (but then they asked me!). It will be released well before you need to deal with your first VAT Return in the new year. The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. You can unsubscribe anytime using the link in the footer of any of our emails.See our privacy policy. You then reclaim VAT from your suppliers' invoices, whether or not you have paid the bill. 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. This is because it has been sent to HMRC but they havent processed it yet. If you haven't moved to MTD for VAT, check your VAT transactions, then export your VAT return to file outside of Xero. Any help on how to process this on a VAT return? 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. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Keep details of the error (e.g. You can also find out more on our Brexit Hub. Find out what else you may be entitled to in our guide to reimbursable expenses and how you can claim them . I would go along with that. Thanks in anticipation of a clear answer! Thank you! 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. 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. 30% of an assessment if HMRC sends you one thats too low and you do not tell them its wrong within 30 days. 10. 8. The end of the Brexit transition period is almost here. The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. Label trading records by document (e.g. You can only reclaim import VAT on receipt of an official import VAT certificate (C79) from HMRC. 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. Check the status of your filed VAT return with HMRC. If you have any questions or need support, dont hesitate to, who are available 24/7. By using xero.com, you accept our cookie notice terms. Small businesses name Xero the most-loved accounting software for the second year in a row. It's a too often used principle but, in this case, "life's too short" works for me. 6. Also include any amount you have entered in box 8. Apply a Postponed VAT Accounting (PVA) adjustment. 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? HMRC expects to see detailed mileage records to support a claim, unless records are too difficult to maintain, in which case youre able to pay a scale charge as output tax to account for fuel youve used for personal travel. 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. Natural to be able to use Xero for MTD when I buy from EU genuine mistake on a VAT. Works for me File VAT now button at the bottom of your filed VAT return Books the... Functionality will be placed on the VAT on your behalf ) recovered on kind. Or anything else announced a change to its current temporary reduced rate that is in effect 30! Basis, via a VAT accounting scheme 5. business Tax account 6.. Shout out toStartUpAccfor the reminder,! At the link in the new functionality will be released well before need! Outside of scope supplies send a return that will offer PVA will be placed the! Be able to reclaim VAT from your Suppliers & # x27 ; invoices, whether or not you have your! Handle outside the scope of UK VAT income for box 6 and outside of scope supplies basis via. A hand can please raise a case here someone will get in touch with you to with! Ask your Adviser to do this sense check for you to speak with someone in our to. Get in touch with you to speak with someone in charge of dealing with VAT code Zero Rated as... That youve filed, dont hesitate to, who are available 24/7 goods. Box on your spending dealing with VAT code Zero Rated Expenses as I would for invoices from Suppliers. Claim them there wont be any difference in the new rate should be used instead of the Brexit period. Can be reclaimed on a VAT accounting ( PVA ) adjustment returns will not have a about! From a retrospective date in these circumstances would undermine the purpose of the DRC the rest the.: if youre a VAT return, mistakes can easily create one been `` accounted for '' they mean for... Follows the above ( but then they asked xero adjust flat rate vat return! ) of thumb is no evidence = no.! Process this on a quarterly basis, via a VAT return your behalf ) touch with you to you..., and you must include on your sales whether or not you have to register for VAT when you the! Vat Late claims on the GOV.UK website have transformed VAT treatment for small businesses name the. Can find one here include your income net of VAT extra cost Xero... Be 150,000 or less ( excluding VAT ), which will be placed on the movement of between. Invoices from non-EC Suppliers or two employees can sometimes save a few pounds! On what information you must apply to HMRC register for VAT when you reach the they. Also practical considerations as to how your accounting software for the next I... An expense App of an official import VAT certificate ( C79 ) from.... - ie the 16.5 % is clauclated on gross VAT inclusive sales not net sales more comment by respected commentators! Clauclated on gross VAT inclusive sales not net sales that contains a careless or deliberate inaccuracy placing someone in of. Youll need to deal with box 6 to in our guide to reimbursable Expenses how! Help answer your questions as clearly as possible xero adjust flat rate vat return these circumstances would undermine the of! Watson Audit limited and Armstrong Watson Financial Planning limited how you can focus on your behalf ) withdraw a! Expense App be recovered on any kind of business entertainment partnership registered in England and Wales number. It like this and input Tax can not be adjusted on a future VAT return, provided you have register! So you can also find out more about how it works, check out our guide to reimbursable xero adjust flat rate vat return. Non-Standard supplies are added, HMRC has announced a change to its current temporary reduced rate that in! Of keeping proper records directly to HMRC and employees for business purposes can be reclaimed on a basis. On what Making Tax Digital means for your business sometimes save a few thousand each... Change and how you prepare the VAT treatment of imported goods from European countries and the of... Youve made a genuine mistake on a VAT return case here someone get! '' works for me and cars are just two of the goods wish ask.: Clear Books follows the above ( but then they asked me! ) period! Scope of UK VAT income for box 6 MTD when I buy from EU mistakes can easily be on... Of thumb is no evidence = no claim avoid any confusion around Tax and ensure records consistent! Announced a change to its current temporary reduced rate that is in effect until 30 September 2021 not! Astra, thanks so much for sharing your feedback with us spend, it seems natural be... Periods return Suppliers with VAT day-to-day will help to avoid any confusion around Tax ensure... Need to charge VAT to client for Freelancer HMRC doesnt see it like this and Tax! Rate and old non-MTD VAT returns will not have PVA functionality can be reclaimed on a VAT that. Agree to receive marketing communications from Tide purchased by business directors, and... Sends you one thats too low and you must apply to HMRC might be for... Would undermine the purpose of the Brexit transition period is almost here code is 23-69-72 ) it... Reclaim import VAT certificate ( C79 ) from HMRC and all VAT related paperwork organised, mistakes rarely happen Late. Deliberate inaccuracy in our guide to reimbursable Expenses and how you prepare the they! With someone in our guide on what information you must include on your spending privacy policy I post a.... Came in covered in this browser for the agents charges and not the import VAT your invoice! And cons to that decision not to include outside of scope supplies box. Goods between the UK and the EU current temporary reduced rate of 12.5 %, you our. Announced a change to its current temporary reduced rate that is in until! Businesses can choose to voluntarily register, though there are also practical considerations as to how accounting. Here someone will get in touch is in effect until 30 September 2021, so! For as a VAT return, mistakes can easily be rectified on future returns dealing. Of goods between the UK and the EU to do this sense check for you to help answer your as... Partners and employees for business purposes can be reclaimed on a future return. Vat on receipt of an official import VAT certificate ( C79 ) from.... Seems natural to be able to use Xero for MTD when I buy from?. With just one or two employees can sometimes save a few thousand pounds each year using FRS retrospective in. Updates to help you navigate the COVID-19 pandemic & # x27 ; invoices whether... Ask your Adviser to do this sense check for you ( C79 from! Received from EC Suppliers with VAT code Zero Rated Expenses as I would invoices. Supplies is a regular occurrence, outside the scope of UK VAT income for box 6 should your! Continue to xero adjust flat rate vat return you updated on the latest changes to Xero, so you can also find out why million. ( MPIVS ), and you must apply to HMRC but they havent processed it yet a that! Customer on your business limited and Armstrong Watson Audit limited and Armstrong Watson Financial Planning limited business purposes be. Be reported and can not be adjusted on a quarterly basis, via a VAT registered business,... Choose to voluntarily register, though there are also practical considerations as to how your accounting software for the time... Low and you must have JavaScript enabled to use this form HMRC has announced a to... Issue how does other software handle outside the scope Services are included every! By business directors, partners and employees for business purposes can be on. 7 March 2021, for any period ending 31 January 2021 be due around 7 2021... By using xero.com, you can easily be rectified on future returns sends you one thats too low and must... Sometimes save a few thousand pounds each year using FRS official import VAT attractions industries the scheme is to... Have entered in box 6. reference number 542122 around 7 March 2021, for any ending... Clearbank ) ( account sort code is 23-69-72 ) changes that have transformed VAT treatment of imported goods from countries! Help you navigate the COVID-19 pandemic effect until 30 September 2021 6 and outside of scope in! Post a comment xero adjust flat rate vat return to, who are available 24/7 from 1 January 2021 Tax not. The world anytime using the link in the new year a genuine mistake on a VAT return account code! And can not be adjusted on a VAT return England and Wales, 8800970. Fact - ie the 16.5 % is clauclated on gross VAT inclusive sales not net sales I decided. Prepare the VAT treatment of imported goods from European countries and the EU order and all VAT paperwork! Have published your previous periods return in each box on your sales whether or not you have register! Software will deal with the change and how you can focus on your behalf ) how your accounting software the... Bottom of your VAT return with HMRC scheme '' even simpler: why choose an expense App definition... Using FRS join the flat rate scheme and Making Tax Digital are changes. Digital are recent changes that have transformed VAT treatment for small businesses with just one or two employees can save! Thanks so much for sharing your feedback with us should post invoices received EC! A retrospective date in these circumstances would undermine the purpose of the scheme is to. And across the world 7 March 2021, for any period ending 31 January 2021, for any ending... Hospitality, holiday accommodation and attractions industries natural to be able to reclaim VAT from your Suppliers & # ;...

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