The new functionality will be automatically available at no extra cost to Xero customers who use Making Tax Digital (MTD) or. 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. Because these purchases are included in every VAT return, mistakes rarely happen. Hi Astra, thanks so much for getting in touch. ASE Professional Services is a trading style of Armstrong Watson Audit Limited and Armstrong Watson LLP. Top Tip: Making Tax Digital is designed to reduce the risk of human error in VAT and tax returns. Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The By using xero.com, you accept our cookie notice terms. So, if your business takes a deposit or down payment from customers for goods or services, VAT is due when that initial payment is received, unless you have already issued an invoice. See below, or. Details about our audit registration can be viewed at www.auditregister.org.uk, under reference number C005636012. The difference (usually a saving), will need to be journalled to the appropriate account by someone with the Adviser user role. 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 !! 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) !! Click Update to generate the VAT report Once HMRC has processed your return its status will change to Filed or Failed. 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. PS: Clear Books follows the above (but then they asked me!). 2023 Xero Limited. "As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry.". You should also include the value, excluding VAT, of any supplies accounted for outside the Flat Rate Scheme, such as the sale of capital expenditure goods.". Here you pay VAT on your sales whether or not your customers have paid. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. This walkthrough guides you Thank you! Is that interpretation wrong?". 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. 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. ClearBank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 754568. 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. 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. If you have any questions about which areas you should update, please contact your accountant or. 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. I have been on the receiving end of a letter from HMRC asking this very point. By using xero.com, you accept our cookie notice terms. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. 5. We use cookies to make your experience better. He may well need to leave the FRS. VAT on fuel purchased by business directors, partners and employees for business purposes can be reclaimed on a VAT return. 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 ; ). 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. Notice 733, section 7.5 in relation to box 6states: "Enter the turnover to which you applied the FRS percentage, including VAT. If there are significant DRC sales then this can be very costly. 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. If you lose paperwork or it gets damaged, ask the supplier to provide a duplicate. There are also practical considerations as to how your accounting software will deal with the change and how you prepare the VAT Return. For further information visit fscs.org.uk. The registered How to fill in each box on your return 4. Thanks for the reply. This is because it has been sent to HMRC but they havent processed it yet. So its cool that Xero now supports it. Thanks in anticipation of a clear answer! By subscribing you agree to receive marketing communications from Tide. Box 6 is the problem for me. Although I think you may be being a little harsh on our green friends. Unfortunately, only 50% of the VAT charged on a lease car is recoverable and youll need to support your claim with your suppliers invoice. We have developed a PVA update in Xero. About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction 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. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. . 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. It's not just 5. This was very well advertised in the months leading up to introduction of the DRC. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. If youre confused, youre not alone. 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. Hi Jo thank you so much for getting in touch. Store all copies of purchase invoice and VAT receipts including export documents and credit notes. Tide is about doing what you love. 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. activities. You alone are responsible for figuring out if you sell any items that fall into these categories, what amount of VAT to charge if you do and exactly how to report those special cases. registered office is 15 Victoria Place, Carlisle, CA1 1EW. This will remain in effect until 31 March 2022. Registered as a limited company in England and Wales, number 7208672. not a deliberate error). If they think this and hence most of their users submit their returns without Outside of Scope supplies in Box 6, then I certainly won't be alone in leaving them out of Box 6! I hope it's in order to generate a new post for an old chestnut (its age means it no longer invites responses). When creating a VAT Return in Xero next year, youll just need to select the PVA option button and add the amount from your MPIVS. 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. 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. This goes to show that even when the figures appear to add up and the VAT codes seem correct, the complexity of VAT means you can never be sure. Reporting - it just keeps getting better! 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. Thanks Paul - that answer suits me. 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). 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. In most cases, providing the error meets HMRCs conditions, you dont need to report it. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. Required fields are marked *. Featured Apps - Managing Staff Expenses: Why choose an expense App. 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. We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. That said, none of us are perfect. Check out our guide to VAT rules and rates on exports . Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Get our best stories straight to your Inbox, To manage this change, HMRC has established a new process called. 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. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). 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. 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. Run your flat rate MTD VAT return Before you start Check that your VAT scheme and VAT number are correct in your financial settings. how it happened, the date it was discovered and the amount of VAT involved), Include the value of the error in your VAT account. Ive sent a request through to the team that looks after Xero Central and asked them to update it. At the link I found some more comment by respected expert commentators I'd missed previously. You are hopefully also aware it's always normal vat being billed the flat rate only evr comes into things on return calcs - not how you bill. ) or they havent processed it yet very point questions about which areas you should update, please contact accountant! In VAT and Tax returns Victoria Place, Carlisle, CA1 1EW your Inbox to. 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