As a side issue how does other software handle outside the scope of UK VAT income for box 6? To improve your own, take a look at our beginners guide to bookkeeping . 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. You must ensure the settings are correctly set up in Xero, so it knows that youre using the flat rate scheme. Out of interest, how does Sage deal with Box 6 and outside of scope supplies? Your email address will not be published. Enter the flat rate percentage which applies to your business. Tip We have separate instructions for our standard rate MTD VAT return and non-MTD VAT return. The registered 2023 Xero Limited. 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. 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). It's not just 5. . By using xero.com, you accept our cookie notice terms. Explanation of some common VAT terms 3. The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. 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) . VAT, or value-added tax, is relatively straightforward in theory. Where errors creep is when non-standard supplies are added. 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. The VAT Flat Rate Scheme is an alternative way for small businesses to calculate VAT due to HMRC. Notice 735 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? You can then file your return as you would normally. 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. Confirm the VAT No. 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. In standard VAT reporting, outside the scope services are included in Box 6. But obviously this amount is too high as historically he has been @ 16.5%. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Were very pleased, too. you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. 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. Thanks for the reply. 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. 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). 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. Hold off on any claim until the C79 certificate proves you are the owner of the goods. 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! ****** 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 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 . Hi Teresa, thank you so much for getting in touch. Placing someone in charge of dealing with VAT day-to-day will help to avoid any confusion around tax and ensure records are consistent. Don't invite HMRC letters. 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. This is because the amount that needs to be entered into box 6 depends on which VAT scheme youre using. 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. We use cookies to make your experience better. 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. 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. Can you elaborate on your question somewhat - being frank your post suggests you may not fully understand how the flat rate process works.- apologies if you do and its simply my lack of ability to understand your point here. Accountants in England and Wales. Your email address will not be published. You can only reclaim import VAT on receipt of an official import VAT certificate (C79) from HMRC. Tide is authorised by the Financial Conduct Authority (FCA) under the Electronic Money Regulations 2011 under firm reference number 900843 for the issuing of electronic money and the provision of payment initiation services and account information services under the Payment Services Regulations 2017. This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. 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. e.g. Box 1 would then show 5,000. Obviously with regard to leaving on dates that don't qualify on both points 1 and 2 above hmrc may be ameniable to help but will probably default to saying no unless you are adept at arm twisting with regard to the vat office. HMRC are expecting Box 1 to be X% of Box 6. Are not made on purpose (i.e. The good news is that as of today, Xero now supports the Flat Rate Scheme and we promise to keep it simple for you. 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. Tide Cards may be issued by both Tide and PPS, who are licensed by Mastercard International for the issuance of cards. I hope that helps. Hi Astra, thanks so much for getting in touch. 9. If youre using the cash accounting scheme or the standard accounting scheme, box 6 should include your income net of VAT. You'll need to make sure you include your EORI and VAT registration number on your customs declaration. 7. Tip VAT registered businesses must use HMRC's Making Tax Digital (MTD) services (HMRC website) to submit VAT returns. We use cookies to make your experience better. Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. 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. The flat rate percentage is applied when you calculate your VAT Return. This was very well advertised in the months leading up to introduction of the DRC. 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. 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. The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. MyRetirement is a trading style of Armstrong Watson Financial Planning Limited. 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 -. How to fill in each box on your return 4. 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. Thats why were trusted by 450,000+ sole traders, freelancers and limited companies throughout the UK. As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry. I did this with my only FRS client back in March, when DRS first came in. The new flat rates for types of businesses can be found on the HMRC website. You must have JavaScript enabled to use this form. This ensures the postponed VAT amounts required by HMRC are handled correctly. His employer are now not paying the VAT on his invoices and paying them directly to HMRC. For further information visit fscs.org.uk. 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. 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? We are using QB Desktop as per the tag. Any such supplies youve had and made should be accounted for under the reverse charge provisions.https://www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-no khalm0 ". See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! However, It appears that may not be the correct thing to do. Some of Tides members also hold e-money accounts provided by Prepay Solutions (PPS) (account sort code is 23-69-72). To learn more about the VAT threshold in the UK, read our guide to the VAT threshold and when should you register for VAT , If Annual accounting scheme:-Improves cash flow as you pay VAT less frequently (in monthly or quarterly instalments), If Annual accounting scheme:-Can only reclaim input tax once a year, which is damaging if you rely on cash from reclaiming VAT throughout the year. Thank you so much for sharing your feedback with us. Save my name and email in this browser for the next time I post a comment. You can find a full list of UK VAT rates on different goods and services on the GOV.UK website. You may wish to ask your adviser to do this sense check for you. The end of the Brexit transition period is almost here. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. 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. 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. Posting the PVA amounts to the VAT return using our new feature will update Box 1 and Box 4 on the VAT return. This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. While these invoices are valid, where claims are concerned they only account for the agents charges and not the import VAT. Clear Books and Xero both agree it should not be in Box 6 it appears. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. VAT is constantly evolving. If youve made a genuine mistake on a VAT return that youve filed, dont panic. 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. You have clicked a link to a site outside of the QuickBooks or ProFile Communities. Go to Reports>All Reports. You can simply correct it by making adjustments on your next VAT return. For example, if a VAT-registered business sells a widget for 1, they will charge the customer 1.20 (assuming the 20% rate applies). Hi Alan, thanks for your comment. Well explain the various VAT schemes in more detail in a later section. 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. Financial Education & Wellbeing Programme, Xero User News - End of HMRCs MTD soft landing period. 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