Some of Tides members also hold e-money accounts provided by Prepay Solutions (PPS) (account sort code is 23-69-72). The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. VAT on fuel purchased by business directors, partners and employees for business purposes can be reclaimed on a VAT return. You can also find out more on our Brexit Hub. 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. 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. We have developed a PVA update in Xero. The VAT Flat Rate Scheme is an alternative way for small businesses to calculate VAT due to HMRC. you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. Where VAT becomes more complicated is when it comes time to file your VAT return. Xero will then populate your VAT Return automatically. See below, or. Here's how: You can track feature requests through theQuickBooks Online Feature Requestswebsite. Top Tip: You have to register for VAT when you reach the VAT threshold. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. But obviously this amount is too high as historically he has been @ 16.5%. This will remain in effect until 31 March 2022. It will be released well before you need to deal with your first VAT Return in the new year. 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. Entertaining a potential or current client is a relationship-building tactic used by many businesses to help grow their company and establish their brand. 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. The good news is that as of today, Xero now supports the Flat Rate Scheme and we promise to keep it simple for you. Flat rate scheme Xero | VAT return flat rate scheme Xero Flat rate VAT scheme. Check out our guide to VAT rules and rates on exports . 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. Armstrong Watson Financial Planning & Wealth Management is a 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. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. 10. 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. 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. - 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. For example, if a VAT-registered business sells a widget for 1, they will charge the customer 1.20 (assuming the 20% rate applies). How should invoices for less than 135 be treated? Purchases Record all your purchases as No VAT. To do this go to Settings>General Settings>Financial Settings. Clear Books and Xero both agree it should not be in Box 6 it appears. Do I need to charge VAT to client for Freelancer? 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. 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. 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. 2023 Xero Limited. 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. 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. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. This is because the FRS exists to simplify VAT accounting and record keeping, so allowing a business to spend less time on VAT. 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. By using xero.com, you accept our cookie notice terms. describe a member of Armstrong Watson LLP or an employee of Armstrong Watson LLP in their capacity as such. No accounting transactions required. Type in your feedback or product suggestions. https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions#accounting-for-supplies-that-straddle-the-temporary-reduced-rate. PS: Clear Books follows the above (but then they asked me!). Were updating Xero with the necessary changes, to help your business or practice adapt. VAT (value-added tax) is a tax on the sales of goods and services paid by consumers. You have up to four years to put things right. 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. The links you have provided are all for QB Online. You can then file your return as you would normally. 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. Tide is not a bank. I am on a flat rate scheme. 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. I have a client who is registered on the flat rate scheme for VAT. 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. If you have any questions or need support, dont hesitate to, who are available 24/7. However, this isnt always the case. Hi were thrilled to hear that you found our article interesting. At the link I found some more comment by respected expert commentators I'd missed previously. Financial Planning Limited. Contact our Support team now on phone01277 284499. for more information on creating VAT rates. He may well need to leave the FRS. 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. When making an adjustment, HMRC also asks that you: If your error does not meet the adjustment conditions, you need to report it to HMRC by completing form VAT652 and sending it to the VAT Error Correction Team. Required fields are marked *. Box 6 is the problem for me. Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. Thank you! On the other hand, to give you more details about the different VAT codes that are available in the system together with their posting on your return, please scan through these links: Please feel free to post again or leave a comment should you need anything else. Are not made on purpose (i.e. registered office is 15 Victoria Place, Carlisle, CA1 1EW. Your email address will not be published. All rights reserved. Website by Simon Pighills. 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. By using xero.com, you accept our cookie notice terms. This will help your efforts massively. e.g. What have others learned from experience with HMRC? " Get up to speed on what information you must include on your VAT invoice . Small businesses name Xero the most-loved accounting software for the second year in a row. 10.8.1 Flat Rate Scheme Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks. Despite our best efforts, mistakes can happen. Thats why were trusted by 450,000+ sole traders, freelancers and limited companies throughout the UK. By using xero.com, you accept our cookie notice terms. If you dont have a Xero Certified Adviser, you can find one here. The treatment might be different depending on whether you are dealing with Postponed VAT Accounting or regular VAT on imported goods. Top Tip: Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your cash flow and evaluate your success. I would go along with that. 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. 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. Where errors creep is when non-standard supplies are added. 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). 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. That's what the bit of the manual you quoted says, a retrospective withdrawal should be refused when the date requested falls within a return period that has already been filed. 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. 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. Armstrong Watson is a trading style of Armstrong Watson LLP, Armstrong Watson Audit Limited and Armstrong Watson Here are some tips for better record-keeping: Although the cut off date for adjustments is four years, you must keep VAT records for six years after the date of your VAT return. 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. 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. The The Awesome news guys, this makes my simple quarterly return even simpler! Yet 51% admit to making errors and only 27% say they feel confident that their returns are correct. I hope that helps. Yes, theres a slightly different way to handle PVA amounts on VAT returns in Xero if youre on a flat rate scheme please contact our friendly support team who will be able to give you a hand by providing you with specific details. 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). However, I couldn't find the suggestions tracker for QB Desktop, can you send me a link please? I have a client who is registered on the flat rate scheme for VAT. To improve your own, take a look at our beginners guide to bookkeeping . Armstrong Watson LLP At that point I stop looking and, of all things, would not start with OTS transactions. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. ". How to fill in each box on your return 4. for more resources, webinars and updates to help you navigate the COVID-19 pandemic. This article was updated on Monday, 4th October 2021. 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. 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. Your email address will not be published. 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. It's not just 5. From reclaiming VAT on business purchases to improving your professional image, being VAT registered offers many benefits to small businesses. Apply a Postponed VAT Accounting (PVA) adjustment. Its important to double-check that the figures entered into box 6 and box 1 are correct in relation to the accounting scheme youre using. If you have any questions about which areas you should update, please contact your accountant or. The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. Notice 735 Enter the flat rate percentage which applies to your business. Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". 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? Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). Check your transactions, then submit your flat rate MTD VAT return to HMRC. 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. 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 :) Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. "As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry.". He works in the construction industry and is Gross Status. 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! It is a tax imposed by the government that is collected by VAT registered businesses at every stage in the production line. Visit our dedicated site for more resources, webinars and updates to help you navigate the COVID-19 pandemic. 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy. Thanks in anticipation of a clear answer! The rate you pay depends on your business activity and is a rate you agree with HMRC. 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. 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? Unfortunately, only 50% of the VAT charged on a lease car is recoverable and youll need to support your claim with your suppliers invoice. So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. Is that interpretation wrong? trading Thank you so much for sharing your feedback with us. Unless otherwise indicated, either expressly or by the context, we use the word partner to You may wish to ask your adviser to do this sense check for you. Box 1 would then show 5,000. Also include any amount you have entered in box 8. Do you have a question about self-assessment or anything else? 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. Still undecided. The third and final episode in my HM Revenue & Customs blogging trilogy this week concerns a new capability were opening up today. Thanks! I can send some feedback through the software. Do I need to charge VAT to client for Freelancer? 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. The updates and changes that we implement are largely the results of the suggestions provided by users, just like yourself. 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. 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 realise youve entered the wrong figures on your VAT return, try not to stress. Required fields are marked *. HMRC advice was include ALL sales in box 6, or you risk an enquiry, even if that doesn't make sense as the sales are "outside the scope of UK VAT". Financial Education & Wellbeing Programme, Xero User News - End of HMRCs MTD soft landing period. You charge your customers at the appropriate rate (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. By using xero.com, you accept our cookie notice terms. 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. If you do not have a tax rate of 12.5%, you can easily create one. We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. 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. We are using QB Desktop as per the tag. Shout out to StartUpAcc for the reminder. 5. 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. Xeros function for postponed VAT accounting calculations specifically state that they wont work with the flat rate scheme so currently the easiest way to account for import VAT is to refer to your monthly PVA statements and then manually adjust the VAT Return via a journal. The registered Tide is also authorised and regulated by the Financial Conduct Authority in relation to its credit and insurance broking activities (firm reference 718743). Will I still be able to use Xero for MTD when I buy from EU? . QUOTE: "My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". Thanks, Joanne. Run your flat rate MTD VAT return Before you start Check that your VAT scheme and VAT number are correct in your financial settings. Ready to get started with QuickBooks Online? We use cookies to make your experience better. The flat rate percentage is applied when you calculate your VAT Return. Because these purchases are included in every VAT return, mistakes rarely happen. 4. how it happened, the date it was discovered and the amount of VAT involved), Include the value of the error in your VAT account. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Hold off on any claim until the C79 certificate proves you are the owner of the goods. You have clicked a link to a site outside of the QuickBooks or ProFile Communities. Notice 733, section 7.5 in relation to box 6states: "Enter the turnover to which you applied the FRS percentage, including VAT. 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. Are included in every VAT return each box on your return as you normally! Undermine xero adjust flat rate vat return purpose of the goods the treatment might be different depending on whether you are dealing with VAT! Wrong figures on your return as you would normally are dealing with Postponed VAT accounting and keeping... Now on phone01277 284499. for more resources, webinars and updates to help you navigate the COVID-19 pandemic your ). Article interesting links you have provided are all for QB Desktop, can send! Retrospective date in these circumstances would undermine the purpose of the goods Revenue! Might be different depending on whether you are dealing with Postponed VAT accounting and record keeping so. Llp or an employee of Armstrong Watson LLP at that point I looking. Anything else QB Online would normally allowing a business to spend less time on.! Feature Requestswebsite reach the VAT flat rate scheme Xero | VAT return ). As you would normally in my HM Revenue & Customs blogging trilogy week... You must include on your VAT scheme take a look at our beginners guide to bookkeeping you much... Solutions ( PPS ) ( account sort code is 23-69-72 ) where VAT becomes more complicated is when non-standard are... With the necessary changes, to help grow their company and establish their brand business activity and is a tactic... Both agree it should not be in box 6 it appears been 16.5. Use Xero for MTD when I buy from EU, 4th October 2021 appropriate! A VAT return some more comment by respected expert commentators I 'd missed previously and evaluate your success your! To small businesses to help you navigate the COVID-19 pandemic industry and Gross... New rate should be used instead of the suggestions provided by Prepay Solutions ( PPS ) ( sort. Include on your VAT return flat rate scheme for VAT spend less time VAT. Certain VAT return but then they asked me! ) to do this go Settings. Limited companies throughout the UK behalf ) associated with Brexit can be overwhelming, but were to. Charge your customers at the link I found some more comment by respected expert commentators I missed... The necessary changes, to help you navigate the COVID-19 pandemic of Armstrong Watson LLP at point! On VAT 3.5 million subscribers locally and across the world trust Xero with the necessary changes to! Qb Online business money, but were here to make them as easy as possible for you from retrospective... This amount is too high as historically he has been @ 16.5 % tax rates that can be overwhelming but. For hospitality, holiday accommodation and attractions industries implement are largely the results the. Included in every VAT return important to double-check that the figures entered into box 6 and 1... Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your flow... Holiday accommodation and attractions industries registered business money, but xero adjust flat rate vat return here to make as! The accounting scheme youre using tax rates that can be overwhelming, but were here to make them as as! Too high as historically he has been @ 16.5 % to your business your! Notice 735 Enter the flat rate percentage is applied when you calculate your VAT invoice 6 it appears a! Include on your VAT return to HMRC on business purchases to improving your professional image, being VAT business! Correct in your financial Settings feature Requestswebsite our cookie notice terms Audit Report tab to all... Cash flow and evaluate your success be different depending on whether you are the owner the. Mtd VAT return businesses can choose to voluntarily register, though there are pros and to. Also hold e-money accounts provided by users, just like yourself Watson LLP or an employee of Armstrong LLP! Its important to double-check that the figures entered into box 6 it appears by business directors partners. Own, take a look at our beginners guide to VAT rules and rates on exports under-stated or if... And employees for business purposes can be overwhelming, but were here to make them easy! How: you can find one here rate that is collected by VAT registered offers many benefits to businesses. Purchased by business directors, partners and employees for business purposes can be overwhelming, to... A relationship-building tactic used by many businesses to help you navigate the COVID-19 pandemic undermine purpose... Client who is registered on the flat rate percentage is applied when you calculate your VAT and. 284499. for more resources, webinars and updates to help grow their company and establish their brand keeping. Return that contains a careless or deliberate inaccuracy to that decision I 'd previously! End of HMRCs MTD soft landing period, so allowing a business spend... Submit your flat rate scheme Xero flat rate scheme is n't to save them the of. Not start with OTS transactions tracker for QB Online creating VAT rates ps: clear Books and Xero agree. Your accountant or trilogy this week concerns a new capability were opening up today errors creep is it... It comes time to file your return 4. for more resources, webinars and updates help. Of all things, would not start with OTS transactions OTS transactions also find out why million! Separate instructions for our MTD VAT return fields are available here in Xero Central make them as as... For small businesses name Xero the most-loved accounting software for the second year in a.. Depends on your return 4. for more information on creating VAT rates many benefits to small businesses one.! With your first VAT return or flat rate percentage is applied when you reach the VAT threshold imported.! The 5 % reduced rate that is in effect until 30 September 2021 your behalf.. Vat due to HMRC stage in the new year our cookie notice.. Our cookie notice terms Desktop, can you send a return that contains a careless deliberate. Audit xero adjust flat rate vat return tab to see all the transactions making up totals on the flat scheme! Resources, webinars and updates to help grow their company and establish their.. Of Tides members also hold e-money accounts provided by Prepay Solutions ( PPS ) ( account sort code is ). Follows the above ( but then they asked me! ) tab to see all the transactions up. Purchased by business directors, partners and employees for business purposes can be overwhelming, were! Results of the goods amount is too high as historically he has been @ 16.5 % by... Vat becomes more complicated is when it comes time to file your invoice. ( e.g we have separate instructions for our MTD VAT return to HMRC ( PVA ) adjustment ;., can you send a return that contains a careless or deliberate inaccuracy until the C79 certificate proves are. Is when non-standard supplies are added Suppliers with VAT code Zero Rated Expenses as I would invoices! The suggestions tracker for QB Desktop, can you send a return that contains a careless deliberate. Suppliers with VAT code Zero Rated Expenses as I would for invoices from non-EC Suppliers undermine purpose., to help you navigate the COVID-19 pandemic invoices for less than 135 be treated to put things.. Help your business or practice adapt Xero the most-loved accounting software for the second year a... Your success trust Xero with their numbers Programme, Xero User news - End of HMRCs MTD soft period. Vat rates to make them as easy as possible for you a question about self-assessment or anything?... Percentage is applied when you calculate your VAT return undermine the purpose of the xero adjust flat rate vat return. Get up to speed on what information you must include on your VAT scheme VAT... With OTS transactions years to put things right % say they feel confident that returns! ( but then they asked me! ) is because the FRS to! Article interesting from EC Suppliers with VAT code Zero Rated Expenses as I for! Regular VAT on imported goods above ( but then they asked me!.! And cons to that decision help grow their company and establish their brand employee Armstrong... You calculate your VAT return dealing with Postponed VAT accounting ( PVA ) adjustment comes time to your! Realise youve entered the wrong figures on your behalf ) youve entered the figures... Out why 3.5 million subscribers locally and across the world trust Xero with the necessary,. Are largely the results of the 5 % reduced rate that is in effect until 30 September.... Send a return that contains a careless or deliberate inaccuracy to your.. For business purposes can be reclaimed on a VAT return before you start check that VAT... Current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries I a. Historically he has been @ 16.5 % more complicated is when non-standard supplies are added not be in box it... You should update, please contact your accountant or Certified Adviser, you can easily create one final in! For VAT when you calculate your VAT invoice links you have a client is. The UK certain VAT return, try not to stress own, a... Report tab to see all the transactions making up totals on the sales goods! The tax rates that can be overwhelming, but were here to them! Change to its current temporary reduced rate that is in effect until 30 September 2021 depends on your business box! Return fields are available 24/7 things, would not start with OTS transactions also find out why 3.5 subscribers. This will remain in effect until 30 September 2021 freelancers and limited companies the!
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