Simply enter in your Percentage Rate into our new Flat Rate VAT Return and Xero will calculate the right amounts for you. Where VAT becomes more complicated is when it comes time to file your VAT return. 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. Check your transactions, then submit your flat rate MTD VAT return to HMRC. Placing someone in charge of dealing with VAT day-to-day will help to avoid any confusion around tax and ensure records are consistent. 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. Entertaining a potential or current client is a relationship-building tactic used by many businesses to help grow their company and establish their brand. The problem with flat rate is that while it is meant to be "simpler" the devil of the detail IMHO actually makes it more complex annd risky way to work with vat as there are some very quirky rules that can cathc one out and don't always make any logical sense (paying vat on zero rated sales wth) !! What have others learned from experience with HMRC? " Are you aware of this fact - ie the 16.5% is clauclated on gross vat inclusive sales not net sales. PVA gives you the option to account for and recover VAT on your imported goods using the same VAT Return form. (PVA). The flat rate percentage is applied when you calculate your VAT Return. Tide is about doing what you love. Shout out to StartUpAcc for the reminder. 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. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. 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. 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. If you haven't moved to MTD for VAT, check your VAT transactions, then export your VAT return to file outside of Xero. Thanks Paul - that answer suits me. Keep details of the error (e.g. 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. You can't rejoin the scheme for 12 months if you leave, https://www.gov.uk/vat-flat-rate-scheme/join-or-leave-the-scheme, Interesting use of words here by hmrc in the linked manual, "You should normally refuse an earlier date where the business has already calculated its VAT liability for the period(s) using the FRS accounting method. Hi Astra, thanks so much for getting in touch. The third and final episode in my HM Revenue & Customs blogging trilogy this week concerns a new capability were opening up today. However, reaping the rewards whilst staying VAT compliant relies on you completing accurate VAT returns a task that isnt always straightforward. This is a commonly known debt relief rule. 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. 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. 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 . 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! By using xero.com, you accept our cookie notice terms. This means that she over-claimed VAT in the amount of 300 in the VAT period ending March 31st. It will be released well before you need to deal with your first VAT Return in the new year. The links you have provided are all for QB Online. The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. If my presumptive answer above is correct the loss of tax for anyone on the 16.5% flat rate category is so minimal as to be inconsequentual as 19.8% of the vat that is normally billed to customeers is paid to the vat office anyway. 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. We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. Purchases Record all your purchases as No VAT. So its cool that Xero now supports it. Youll need to make sure you include your EORI and VAT registration number on your customs declaration. Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". Box 6 is not only FRS turnover alone, which some sources state it is. Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). 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. Explanation of some common VAT terms 3. registered office is 15 Victoria Place, Carlisle, CA1 1EW. From 1 January 2021, controls will be placed on the movement of goods between the UK and the EU. Take care always, @klous1. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. Thats why were trusted by 450,000+ sole traders, freelancers and limited companies throughout the UK. ". It may no longer be for him. Accountants in England and Wales. If your status is Failed, click on the VAT Return link to read the error message, or read the notification in your Xero inbox. If you have any questions or need support, dont hesitate to, who are available 24/7. However, I couldn't find the suggestions tracker for QB Desktop, can you send me a link please? Thanks! Any help on how to process this on a VAT return? That said, none of us are perfect. This walkthrough guides you Tip We have separate instructions for our standard rate MTD VAT return and non-MTD VAT return. Top Tip: If you dont already have an accountant and arent sure how to find the right one for your business, read our guide to choosing an accountant for your small business . To reclaim VAT on any business expense, you must provide evidence in the form of a VAT invoice. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. Apologies if any of above is wrong peeps. The difference (usually a saving), will need to be journalled to the appropriate account by someone with the Adviser user role. 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. 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). Firm Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. Here you pay VAT on your sales whether or not your customers have paid. 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. Ive sent a request through to the team that looks after Xero Central and asked them to update it. 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. You may wish to ask your adviser to do this sense check for you. activities. 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. You then reclaim VAT from your suppliers' invoices, whether or not you have paid the bill. It's nice to have you here in the Community, @klous1. 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. VAT is constantly evolving. From 1 October 2021, a new reduced rate of 12.5% will apply. Tide is not a bank. This will remain in effect until 31 March 2022. He may well need to leave the FRS. If you realise youve entered the wrong figures on your VAT return, try not to stress. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. 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. is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business Financial Education & Wellbeing Programme, Xero User News - End of HMRCs MTD soft landing period. All you need to do is write to VAT and let them know. While these invoices are valid, where claims are concerned they only account for the agents charges and not the import VAT. Thank you so much for sharing your feedback with us. registered office is 15 Victoria Place, Carlisle, CA1 1EW. I can see how having this additional option and functionality would be helpful for you and your business. Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. 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. 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. 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. PPS holds an amount equivalent to the money in Tide current accounts in a safeguarding account which gives customers protection against PPS insolvency. Although I think you may be being a little harsh on our green friends. 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. 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. 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. Top Tip: Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your cash flow and evaluate your success. Label trading records by document (e.g. Photo by Kate Oseen, published on Unsplash. 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. You have up to four years to put things right. 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. Perhaps other software has a VAT flag for supply of overseas services. ClearBank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 754568. We have developed a PVA update in Xero. If the error was made as a result of dishonest or careless behaviour, HMRC can charge you a penalty of up to: You can find further information on correcting VAT return errors and penalties on the GOV.UK website. Small businesses name Xero the most-loved accounting software for the second year in a row. Once HMRC has processed your return its status will change to Filed or Failed. He works in the construction industry and is Gross Status. 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. Overview 2. Were updating Xero with the necessary changes, to help your business or practice adapt. 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 ). If you lose paperwork or it gets damaged, ask the supplier to provide a duplicate. 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. Hi Gary, small businesses with just one or two employees can sometimes save a few thousand pounds each year using FRS. 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. However, It appears that may not be the correct thing to do. 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. We use cookies to make your experience better. It's not just 5. You can then file your return as you would normally. 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. As an aside, don't see how the FRS % can be "too high". 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. 5. 8. 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)). 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. Well continue to keep you updated on the latest changes to Xero, so you can focus on 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. Hello, the article you linked in Xero Central about VAT return fields still refers to EC Acquisition tax rate and EC Purchase tax rate, it would be really helpful if this article could now be updated post Brexit. Armstrong Watson Audit Limited is registered to carry on audit work in the UK by the Institute of Chartered By clicking "Continue", you will leave the community and be taken to that site instead. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). ASE Professional Services is a trading style of Armstrong Watson Audit Limited and Armstrong Watson LLP. You can also find out more on our. 2023 Xero Limited. Box 6 is the problem for me. 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. The VAT Flat Rate Scheme is an alternative way for small businesses to calculate VAT due to HMRC. Do I need to charge VAT to client for Freelancer? We just need to be able to enter the correct PVA VAT for each transaction/quarter without a messy workaround. Website by Simon Pighills. The issuer of your Tide card will be identified on your monthly card statement. For further information visit fscs.org.uk. In addition to the purchase of a car, mistakes are commonly made on lease cars, where 100% of VAT is recovered as input tax. You have clicked a link to a site outside of the QuickBooks or ProFile Communities. See below, or. How the flat rate MTD VAT return works Run your flat rate MTD VAT return office is 15 Victoria Place, Carlisle, CA1 1EW. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. 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? We use cookies to make your experience better. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. how much VAT you charge to customers). Thanks to the author for sharing such a great post. 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! 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. Hi were thrilled to hear that you found our article interesting. If not, delegate the role to someone with sufficient knowledge and expertise to keep you VAT compliant. Thanks for the reply. This will help your efforts massively. VAT on fuel purchased by business directors, partners and employees for business purposes can be reclaimed on a VAT return. 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. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. 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. The good news is that as of today, Xero now supports the Flat Rate Scheme and we promise to keep it simple for you. This table explains each scheme in more detail. Perform the following steps to complete a VAT return: 3. 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. Your email address will not be published. Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. Viciuno 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. 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. Contact our Support team now on phone01277 284499. It will be released well before you need to deal with your first VAT Return in the new year. The VAT Flat Rate Scheme. 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. Filed or Failed double-check that the figures entered into box 6 and box 1 are correct in to. With HMRC? return in the new year not just 5 VAT ending., reaping the rewards whilst staying VAT compliant ensure records are consistent and VAT. 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