is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business 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. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. 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. invoices and receipts) so that you can easily pinpoint figures. Required fields are marked *. By using xero.com, you accept our cookie notice terms. Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. 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!! Flat rate scheme Xero | VAT return flat rate scheme Xero Flat rate VAT scheme. In this post, were going to take you through the most common VAT return errors to help you complete your returns accurately and show you what to do if you end up making a mistake. I'll be happy to help. You can find a full list of UK VAT rates on different goods and services on the GOV.UK website. 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. Will the VAT due on these be invoiced by freight company as currently for ROW suppliers and reclaimed via the VAT Return when backed up by a C79? Find out what else you may be entitled to in our guide to reimbursable expenses and how you can claim them . Errors of more than 10,000, up to a maximum of 50,000 can also be adjusted if the error is not more than 1% of the figure entered in box 6. QUOTE: "My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". PPS holds an amount equivalent to the money in Tide current accounts in a safeguarding account which gives customers protection against PPS insolvency. To reclaim VAT on any business expense, you must provide evidence in the form of a VAT invoice. Click the File VAT Now button at the bottom of your VAT Return. Clear Books and Xero both agree it should not be in Box 6 it appears. Thats why were trusted by 450,000+ sole traders, freelancers and limited companies throughout the UK. The new flat rates for types of businesses can be found on the HMRC website. For the UK, theHMRCs FlatRate Scheme (FRS) for VAT is a beautifully simple scheme for businesses who dont have an accounting system, but a beautifully complicated scheme for businesses who do have an accounting system and want to take advantage of its benefits. All rights reserved. This is because the amount that needs to be entered into box 6 depends on which VAT scheme youre using. Get up to speed on what information you must include on your VAT invoice . 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. 9. VAT on fuel purchased by business directors, partners and employees for business purposes can be reclaimed on a VAT return. 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) . Still undecided. Are not made on purpose (i.e. I have never bought goods from outside the EU so have no experience of this. 2023 Xero Limited. 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. Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. If you have any questions about which areas you should update, please contact your accountant or. No accounting transactions required. Box 6 is not only FRS turnover alone, which some sources state it is. I will enusure in future i will always make my application to leave flat rate before i have done the final checks on said vat return :) The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. Details about our audit registration can be viewed at www.auditregister.org.uk, under reference number C005636012. You can find a full list of MTDfV software on the GOV.UK website. Thanks, Joanne. 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. e.g. 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. 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. Small businesses name Xero the most-loved accounting software for the second year in a row. You should also include the value, excluding VAT, of any supplies accounted for outside the flat rate scheme, such as the sale of any capital goods on which you have reclaimed input VAT, and reverse charge transactions. I would go along with that. However, It appears that may not be the correct thing to do. 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). To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. 2023 Xero Limited. Purchases Record all your purchases as No VAT. Thanks! 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. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. That said, I'd encourage you to send feedback or product suggestions from QBO where they will be sent directly to our engineers. Because these purchases are included in every VAT return, mistakes rarely happen. 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. 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. You charge your customers at the appropriate rate (e.g. 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. reference number 542122. 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! You'll need to make sure you include your EORI and VAT registration number on your customs declaration. for more information about creating and accessing your cases. I have a client who is registered on the flat rate scheme for VAT. 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. I have a client who is registered on the flat rate scheme for VAT. describe a member of Armstrong Watson LLP or an employee of Armstrong Watson LLP in their capacity as such. Do I need to charge VAT to client for Freelancer? 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 -. Apply a Postponed VAT Accounting (PVA) adjustment. ****** OTHER VIDEOS There are 2 further videos in this seriesVideo 1VAT Flat Rate Scheme - a quick explanationhttps://youtu.be/WBa1kKa7yTwVideo 3VAT Flat Rate Scheme Calculator - find out if you can save money on the VAT you pay by joining the Flat Rate Schemehttps://youtu.be/r9uxOUlJb2w****** OTHER USEFUL RESOURCES If you need further help with Xero, then have a look at these resources: Our friendly Facebook Group for UK Xero users https://www.facebook.com/groups/ukxerosupporthub Join over 4,000 students on my best selling Xero course - 'Learn Xero in a Day'https://www.udemy.com/course/xero-in-a-day/?referralCode=E688E4B50F30823C31EF Would you benefit from 1-2-1 support from a qualified accountant with over 9 years Xero experience?I'm available for 1 hour online coaching by Zoom - book your place using the link below.https://app.acuityscheduling.com/schedule.php?owner=14206562 Posting the PVA amounts to the VAT return using our new feature will update Box 1 and Box 4 on the VAT return. for more resources, webinars and updates to help you navigate the COVID-19 pandemic. Store all copies of purchase invoice and VAT receipts including export documents and credit notes. This walkthrough guides you Are you aware of this fact - ie the 16.5% is clauclated on gross vat inclusive sales not net sales. They will then pass on the VAT they collect to the government, typically on a quarterly basis, via a 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. Top Tip: Making Tax Digital is designed to reduce the risk of human error in VAT and tax returns. 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? 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. 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. Ta all. activities. This table explains each scheme in more detail. 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. Required fields are marked *. Simply enter in your Percentage Rate into our new Flat Rate VAT Return and Xero will calculate the right amounts for you. 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. how much VAT you charge to customers). how it happened, the date it was discovered and the amount of VAT involved), Include the value of the error in your VAT account. Your email address will not be published. Hi Roxanne, thank you very much for bringing this to our attention. Contact our Support team now on phone01277 284499. You cam leave the FRS whenever you want. For further information visit fscs.org.uk. You should review this fella's VAT liability immediately. I hope that helps. 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. 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. From reclaiming VAT on business purchases to improving your professional image, being VAT registered offers many benefits to small businesses. I have always done my application to leave via email application and as of yet this has alwasy worked albeit response is slow - the only annoying bit here is you dont get get an email confirmation to say your emaoil has ben received - not great bearing in mind it may be 4 months before you here from them - thankfully my requests do seem to be on file at hmrc even if not actioned as of yet. This was very well advertised in the months leading up to introduction of the DRC. Shout out to StartUpAcc for the reminder. To save you time on applying the reduced 12.5% VAT rate for every transaction, Xero enables you to set up default rates. He works in the construction industry and is Gross Status. 8. PVA is quite a complex topic. Therefore, its important that you get all paperwork in order and chase up any missing or late invoices before submitting your tax return. you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. 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. Tide Cards may be issued by both Tide and PPS, who are licensed by Mastercard International for the issuance of cards. About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction Photo by Kate Oseen, published on Unsplash. Viciuno 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. Save my name and email in this browser for the next time I post a comment. You must have JavaScript enabled to use this form. Make sure to highlight every new or unusual transaction so that you can be sure that its given the correct treatment. The issuer of your Tide card will be identified on your monthly card statement. 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)). Thanks! The third and final episode in my HM Revenue & Customs blogging trilogy this week concerns a new capability were opening up today. By using xero.com, you accept our cookie notice terms. 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. We have developed a PVA update in Xero. The difference (usually a saving), will need to be journalled to the appropriate account by someone with the Adviser user role. Your email address will not be published. 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. 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. Featured Apps - Managing Staff Expenses: Why choose an expense App. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. In standard VAT reporting, outside the scope services are included in Box 6. For example, if a VAT-registered business sells a widget for 1, they will charge the customer 1.20 (assuming the 20% rate applies). 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. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. Hi were thrilled to hear that you found our article interesting. 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. Registered as a limited company in England and Wales, number 8800970. 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. I show you how to set up your Xero Account for the Flat Rate Scheme, how to record your transactions and how to check what then appears on your VAT return. From 1 January 2021, controls will be placed on the movement of goods between the UK and the EU. Enter the flat rate percentage which applies to your business. Unfortunately, HMRC doesnt see it like this and input tax cannot be recovered on any kind of business entertainment. Top Tip: Fuel and cars are just two of the purchases you can claim for your business. 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. Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. Blogging trilogy this week concerns a new capability were opening up today and registration! Of business entertainment you to send feedback or product suggestions from QBO they. & # x27 ; ll need to make sure to highlight every or., thank you very much for bringing this to our engineers, Xero you... 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