Also include any amount you have entered in box 8. Perhaps other software has a VAT flag for supply of overseas services. 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. Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. 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. Armstrong Watson Trustees Limited is a limited company registered in England and Wales, number 84495656. No outside of scope supplies in Box 6. 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/ 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). Lastly, if youre a business using different software products such as hospitality products that integrate with Xero, please check if theyve got capabilities to deal with reduced VAT sales and purchases. Store all copies of purchase invoice and VAT receipts including export documents and credit notes. 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. 9. Thanks! PVA is quite a complex topic. I can send some feedback through the software. See below, or. I have a client who is registered on the flat rate scheme for VAT. I am on a flat rate scheme. Click Update to generate the VAT report Featured Apps - Managing Staff Expenses: Why choose an expense App. 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 . Introduction How the Flat Rate Scheme for VAT works in Xero XU Academy 6.25K subscribers Subscribe 80 Share 3.2K views 1 year ago VAT in Xero Following on from my explanation of the Flat. Top Tip: If youre a VAT registered company, youll need to provide and record VAT invoices. 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. 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. 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. Box 6 is the problem for me. 2023 Xero Limited. Hi Alan, thanks for your comment. Flat rate and old non-MTD VAT Returns will not have PVA functionality. describe a member of Armstrong Watson LLP or an employee of Armstrong Watson LLP in their capacity as such. 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 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. 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. Youll then be notified of whether the amount you calculated is correct and how much interest or tax you owe. Once you are registered with HMRC, they will give you a rate. As scary as HMRC can seem when it comes to matters of tax, they understand that mistakes happen and wont automatically hit you with a penalty. how it happened, the date it was discovered and the amount of VAT involved), Include the value of the error in your VAT account. 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. PPS holds an amount equivalent to the money in Tide current accounts in a safeguarding account which gives customers protection against PPS insolvency. Any help on how to process this on a VAT return? If you have any questions or need support, dont hesitate to, who are available 24/7. This walkthrough guides you Tip We have separate instructions for our standard rate MTD VAT return and non-MTD VAT return. We use cookies to make your experience better. Clear Books and Xero both agree it should not be in Box 6 it appears. 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. The All Rights Reserved. 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! Placing someone in charge of dealing with VAT day-to-day will help to avoid any confusion around tax and ensure records are consistent. If you lose paperwork or it gets damaged, ask the supplier to provide a duplicate. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. Notice 733, section 7.5 in relation to box 6states: "Enter the turnover to which you applied the FRS percentage, including VAT. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. On the Flat Rate Vat scheme, your day-to-day processing remains unchanged and VAT calculates at the standard, lower, exempt, zero rated and No VAT rates as normal. 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. Expert guide to CIS and new reverse charge rules, Getting started with client engagement letters, A fool-proof marketing strategy for accountants. You cam leave the FRS whenever you want. 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. 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). Still undecided. 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)). Enter the flat rate percentage which applies to your business. Other items have a reduced-rate (5%) or a zero rate of VAT but are still considered taxable and therefore must be included in your VAT returns. 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. 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. Ta all. The article was very well written and providing xero ready for uk vat change. The rate you pay depends on your business activity and is a rate you agree with HMRC. 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. It will be released well before you need to deal with your first VAT Return in the new year. Thanks in anticipation of a clear answer! The flat rate adjustment to balance the vat account which appears at the very bottom of the Return is the difference between the standard VAT used on invoices or bills and the VAT amount claimed based on your flat rate percentage. See below, or check out Xero Central for more information on creating VAT rates. No accounting transactions required. To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. It might be best for you to speak with someone in our support team directly so they can give you a hand. Where VAT becomes more complicated is when it comes time to file your VAT return. Flat Rate and VAT Domestic Reverse Charge, Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks, Automate Construction Industry Scheme obligations, R&D Tax Relief in Construction: an overview, Coconut now supports subcontractors on CIS. Financial Planning Limited. It can be really great for people like me who are looking for grabbing more knowledge about it. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Fortunately, as simple a mistake as this is to make, its an easy one to avoid by remembering that any payment received creates a tax point for VAT purposes. 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. Where errors creep is when non-standard supplies are added. Hold off on any claim until the C79 certificate proves you are the owner of the goods. we might record 25 VAT on a 110EUR (90) bill.Therefore, we need to make these VAT adjustments as our VAT return MUST agree with the PVA statement (so I'm told).Do Quickbooks plan to create similar functionality as Xero to allow easy posting of PVA VAT adjustments?Thanks! VAT is constantly evolving. Flat rate scheme Xero | VAT return flat rate scheme Xero Flat rate VAT scheme. If you're using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. By using xero.com, you accept our cookie notice terms. Firm You can also find out more on our Brexit Hub. 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. Top Tip: Making Tax Digital is designed to reduce the risk of human error in VAT and tax returns. By using xero.com, you accept our cookie notice terms. To reclaim VAT on any business expense, you must provide evidence in the form of a VAT invoice. To manage this change, HMRC has established a new process called Postponed VAT Accounting (PVA). reference number 542122. 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 ). Armstrong Watson LLP Check out our guide to VAT rules and rates on exports . If you can please raise a case here someone will get in touch with you to help answer your questions as clearly as possible. https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions#accounting-for-supplies-that-straddle-the-temporary-reduced-rate. 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!! Overview 2. If youre using the cash accounting scheme or the standard accounting scheme, box 6 should include your income net of VAT. A number of the VAT mistakes weve covered in this post come from poorly maintained records. Small businesses name Xero the most-loved accounting software for the second year in a row. 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. Griffin is the trading name of Griffin Audit Limited. Top Tip: Fuel and cars are just two of the purchases you can claim for your business. 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. Create a folder that contains copies of your VAT certificate, submitted VAT returns and all correspondence with HMRC. 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 !! This ensures the postponed VAT amounts required by HMRC are handled correctly. Have you looked here for a Plain English guide? 6. The registered Just had a client investigated. 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. 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 ; ). is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. Perform the following steps to complete a VAT return: 3. I have a client who is registered on the flat rate scheme for VAT. 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. I hope it's in order to generate a new post for an old chestnut (its age means it no longer invites responses). Simply enter in your Percentage Rate into our new Flat Rate VAT Return and Xero will calculate the right amounts for you. The risk of listing net figures as gross, reclaiming VAT too early on imports, reclaiming VAT without purchase invoices and recovering VAT too early from creditors can all be reduced with good bookkeeping and accurate records. Thanks! Hi Gary, small businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS. trading 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). You can find some information about adjusting the amounts on a VAT return here. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. DRC has been around for a while now so you should really have looked at this before, can not see any benefit from being on the FRS. By using xero.com, you accept our cookie notice terms. Do I need to charge VAT to client for Freelancer? Check your transactions, then submit your flat rate MTD VAT return to HMRC. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! All content 2020 Armstrong Watson. This can be complicated because there are several VAT schemes that businesses can choose from and the scheme you choose may affect your VAT rate (i.e. How to fill in each box on your return 4. Tide, the Tide logo, the Swell, and Do less banking are trademarks and trade names of Tide Platform Limited, and may not be used or reproduced without the consent of the owner. This is a commonly known debt relief rule. You charge your customers at the appropriate rate (e.g. 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. style of Armstrong Watson Financial Planning Limited. 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. Be the first to hear about our webinars, new features and business tips to help you save time and money. Are you aware of this fact - ie the 16.5% is clauclated on gross vat inclusive sales not net sales. Although I think you may be being a little harsh on our green friends. By using xero.com, you accept our cookie notice terms. Viciuno Unless otherwise indicated, either expressly or by the context, we use the word partner to Were updating Xero with the necessary changes, to help your business or practice adapt. Tide Cards may be issued by both Tide and PPS, who are licensed by Mastercard International for the issuance of cards. 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. Accountants in England and Wales. 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. From 1 October 2021, a new reduced rate of 12.5% will apply. I have never bought goods from outside the EU so have no experience of this. 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. Small businesses name Xero the most-loved accounting software for the second year in a row. This is usually received around three weeks after the end of the month you received the goods in the UK. 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. Of purchase invoice and VAT receipts including export documents and credit notes clear and! New features and business tips to xero adjust flat rate vat return answer your questions as clearly as possible 2021! First VAT return and non-MTD VAT return LLP check out Xero Central more! You looked here for a Plain English guide rates on exports be first. 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