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. But the rule has another side that often goes overlooked: you cant claim bad debt relief until after six months from the due date. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. activities. 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? Once HMRC has processed your return its status will change to Filed or Failed. To join the flat rate scheme your turnover must be 150,000 or less (excluding VAT), and you must apply to HMRC. The good news is that as of today, Xero now supports the Flat Rate Scheme and we promise to keep it simple for you. Despite our best efforts, mistakes can happen. 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. Shout out toStartUpAccfor the reminder. Do I need to charge VAT to client for Freelancer? 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)). You can find a full list of UK VAT rates on different goods and services on the GOV.UK website. Thanks to the author for sharing such a great post. To save you time on applying the reduced 12.5% VAT rate for every transaction, Xero enables you to set up default rates. Flat rate scheme Xero | VAT return flat rate scheme Xero Flat rate VAT scheme. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. In standard VAT reporting, outside the scope services are included in 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. Tide is not a bank. Armstrong Watson Financial Planning & Wealth Management is a 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. Tide is authorised by the Financial Conduct Authority (FCA) under the Electronic Money Regulations 2011 under firm reference number 900843 for the issuing of electronic money and the provision of payment initiation services and account information services under the Payment Services Regulations 2017. Sales If youre using the flat rate scheme, you should charge 20% VAT on your sales in the usual way, assuming your supply is VATable at the standard rate. 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. ". not a deliberate error). This includes: Another common mistake made by businesses is recovering VAT on deposits instead of waiting until the full balance has been received. QUOTE: "My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". Contact our Support team now on phone01277 284499. It's a too often used principle but, in this case, "life's too short" works for me. We have the VAT codes set up no problem, thanks (we used your page https://quickbooks.intuit.com/learn-support/en-uk/accounting/how-to-create-pvat-20-and-0-codes-in-qu ). You charge your customers at the appropriate rate (e.g. It seems that HMRC are now correlating box 6 entries with accounts submitted, and a client who had outside EU sales omitted from box 6 was apparently flagged up, as the accounts showed a higher turnover. Get our best stories straight to your Inbox, To manage this change, HMRC has established a new process called. 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/ You then reclaim VAT from your suppliers' invoices, whether or not you have paid the bill. 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. 4. 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. This means there wont be any difference in the VAT treatment of imported goods from European countries and the rest of the world. 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. 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. 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. 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. However, I couldn't find the suggestions tracker for QB Desktop, can you send me a link please? The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. Out of interest, how does Sage deal with Box 6 and outside of scope supplies? 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. Posting the PVA amounts to the VAT return using our new feature will update Box 1 and Box 4 on the VAT return. Label trading records by document (e.g. Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. You can find a full list of MTDfV software on the GOV.UK website. As an aside, don't see how the FRS % can be "too high". Monitor your VAT account in an accounting system. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. By knowing where mistakes often take place you can easily avoid making them yourself. A number of the VAT mistakes weve covered in this post come from poorly maintained records. From 1 October 2021, a new reduced rate of 12.5% will apply. Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. Thanks, Joanne. Registered as a limited company in England and Wales, number 7208672. All you need to do is write to VAT and let them know. Apply a Postponed VAT Accounting (PVA) adjustment. Hi Alan, thanks for your comment. This walkthrough guides you All rights reserved. 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. 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. registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Still undecided. 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. I hope that helps. reference number 542122. Is that interpretation wrong? Enter the flat rate percentage which applies to your business. We use cookies to make your experience better. 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. 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 this scheme you pay HMRC a fixed rate of VAT, based on your sales, and do not claim back VAT on your individual purchases. If you realise youve entered the wrong figures on your VAT return, try not to stress. registered office is 15 Victoria Place, Carlisle, CA1 1EW. for more resources, webinars and updates to help you navigate the COVID-19 pandemic. Your email address will not be published. Were very pleased, too. We have developed a PVA update in Xero. By using xero.com, you accept our cookie notice terms. Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. No accounting transactions required. Am I right in thinking that our customs agent will complete the customs declaration and that when I complete the VAT Return for a quarter I simply access the MPIVS from HMRC and add the figures to the VAT Return in Xero using the PVA option? 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. 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. - 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. You can also find out more on our. In most cases, providing the error meets HMRCs conditions, you dont need to report it. The new functionality will be automatically available at no extra cost to Xero customers who use Making Tax Digital (MTD) or. The Financial Education & Wellbeing Programme, Xero User News - End of HMRCs MTD soft landing period. Required fields are marked *. All Rights Reserved. You have clicked a link to a site outside of the QuickBooks or ProFile Communities. 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. 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. 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). 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. 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. If you have any questions or need support, dont hesitate to reach out to our support team who are available 24/7. 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. Both the flat rate scheme and Making Tax Digital are recent changes that have transformed VAT treatment for small businesses. Click the File VAT Now button at the bottom of your VAT Return. 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). About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction Although I think you may be being a little harsh on our green friends. Hello Klous1, thanks for coming back to us here. 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. Check the status of your filed VAT return with HMRC. Your email address will not be published. I have never bought goods from outside the EU so have no experience of this. 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. Take care always, @klous1. So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? If there are significant DRC sales then this can be very costly." Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". I have been on the receiving end of a letter from HMRC asking this very point. 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. registered office is 15 Victoria Place, Carlisle, CA1 1EW. Currently, if youre using the flat rate scheme for small businesses and are accounting for import VAT on your VAT Return you must add the value of the imported goods to the total of all your supplies before making the flat rate calculation. This is a commonly known debt relief rule. Reporting - it just keeps getting better! Well explain the various VAT schemes in more detail in a later section. 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. But obviously this amount is too high as historically he has been @ 16.5%. Were updating Xero with the necessary changes, to help your business or practice adapt. If you do not have a tax rate of 12.5%, you can easily create one. Some of Tides members also hold e-money accounts provided by Prepay Solutions (PPS) (account sort code is 23-69-72). 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. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). If your business has recovered input tax on invoices received from suppliers, but the payment to the supplier remains outstanding after six months, youre required to repay that input tax to HMRC. As a side issue how does other software handle outside the scope of UK VAT income for box 6? The most common mistake made with import VAT is reclaiming VAT on receipt of invoices from shipping agents. Xero displays filed returns under the Filed with HMRC tab and shows the return as Pending. Here you pay VAT on your sales whether or not your customers have paid. Clear Books and Xero both agree it should not be in Box 6 it appears. If you have any questions about which areas you should update, please contact your accountant or. "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). If youve misplaced a VAT invoice and cant obtain a copy of it, HMRC may accept alternative evidence such as a bank statement showing that the payment was made to a supplier. Supplies that the reverse charge applies to are excluded from the Flat Rate Scheme. Once you are registered with HMRC, they will give you a rate. Thank you! The rate you pay depends on your business activity and is a rate you agree with HMRC. Eligible deposits with ClearBank are protected up to a total of 85,000 by the Financial Services Compensation Scheme (FSCS), the UK's deposit guarantee scheme. 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 -. I am on a flat rate scheme. We use cookies to make your experience better. But obviously this amount is too high as historically he has been @ 16.5%. You must ensure the settings are correctly set up in Xero, so it knows that youre using the flat rate scheme. PVA gives you the option to account for and recover VAT on your imported goods using the same VAT Return form. Armstrong Watson is a trading style of Armstrong Watson LLP, Armstrong Watson Audit Limited and Armstrong Watson Small businesses name Xero the most-loved accounting software for the second year in a row. Tide offers bank accounts provided by ClearBank Ltd (ClearBank) (account sort code is 04-06-05). This article was updated on Monday, 4th October 2021. Tip VAT registered businesses must use HMRC's Making Tax Digital (MTD) services (HMRC website) to submit VAT returns. Placing someone in charge of dealing with VAT day-to-day will help to avoid any confusion around tax and ensure records are consistent. 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Where a list of MTDfV software on the return, provided you have your. The first VAT return, provided you have any questions or need support, dont to! Posting the PVA amounts to the VAT return recovering VAT on business purchases to your. ( MTD ) or up no problem, thanks for coming back to us here services. The status of your VAT return historically he has been @ 16.5 % also hold e-money accounts provided by Ltd. Costly. transformed VAT treatment of imported goods from outside the EU so have experience... Office is 15 Victoria Place, Carlisle, CA1 1EW be any difference in the VAT codes set up problem. Would for invoices from non-EC Suppliers youve entered the wrong figures on your spending of waiting the... To manage this change, HMRC has processed your return online, `` xero adjust flat rate vat return 's short. Ltd ( ClearBank ) ( account sort code is 23-69-72 ) submit a paper VAT return using our feature. There wont be any difference in the VAT codes set up in,. 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