Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Hi Astra, thanks so much for getting in touch. 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)). As a side issue how does other software handle outside the scope of UK VAT income for box 6? 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. 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. Placing someone in charge of dealing with VAT day-to-day will help to avoid any confusion around tax and ensure records are consistent. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). 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. Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. The new functionality will be automatically available at no extra cost to Xero customers who use Making Tax Digital (MTD) or. This includes: Another common mistake made by businesses is recovering VAT on deposits instead of waiting until the full balance has been received. Use our flat rate Making Tax Digital (MTD) VAT return if you're on a VAT flat rate scheme. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. 30% of an assessment if HMRC sends you one thats too low and you do not tell them its wrong within 30 days. Flat rate and old non-MTD VAT Returns will not have PVA functionality. 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. This will help your efforts massively. At the link I found some more comment by respected expert commentators I'd missed previously. 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. Xero will then populate your VAT Return automatically. Hi Roxanne, thank you very much for bringing this to our attention. We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. Supplies that the reverse charge applies to are excluded from the Flat Rate Scheme. 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 ). All Rights Reserved. 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. I have never bought goods from outside the EU so have no experience of this. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. You can find a full list of UK VAT rates on different goods and services on the GOV.UK website. Reporting - it just keeps getting better! Thanks in anticipation of a clear answer! Top Tip: Making Tax Digital is designed to reduce the risk of human error in VAT and tax returns. invoices and receipts) so that you can easily pinpoint figures. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. th QuickBooks Online, QuickBooks Self-Employed, QuickBooks ProAdvisor Program, QuickBooks Online Accountant, https://central.xero.com/s/article/Adjust-the-amounts-on-a-VAT-return#ApplyaPVAadjustment. Apply a Postponed VAT Accounting (PVA) adjustment. trading We use cookies to make your experience better. 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. 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. But the rule has another side that often goes overlooked: you cant claim bad debt relief until after six months from the due date. He works in the construction industry and is Gross Status. style of Armstrong Watson Financial Planning Limited. To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. Despite our best efforts, mistakes can happen. It's not just 5. Take care always, @klous1. Unfortunately, HMRC doesnt see it like this and input tax cannot be recovered on any kind of business entertainment. For VAT Return periods starting after 1st June 2022, import VAT accounted for using postponed VAT accounting (PVA) should not be included in your flat rate turnover. All rights reserved. for more information on creating VAT rates. The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. Armstrong Watson LLP Armstrong Watson Audit Limited is registered to carry on audit work in the UK by the Institute of Chartered Clear Books and Xero both agree it should not be in Box 6 it appears. -. 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. 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. By using xero.com, you accept our cookie notice terms. Save my name and email in this browser for the next time I post a comment. Website by Simon Pighills. Still undecided. If you realise youve entered the wrong figures on your VAT return, try not to stress. However, the general rule of thumb is no evidence = no claim. They are on hand to answer any questions you may have about opening a Tide account or any of our products, 9am - 6pm daily. If youre using the cash accounting scheme or the standard accounting scheme, box 6 should include your income net of VAT. 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. Don't create work for yourself needlessly. Any sales which are not DRC can still fall under the flat rate but then it gets confusing, especially when flat rate was designed to be a simplification and so this is why many builders simply came off flat rate scheme. Run your flat rate MTD VAT return Before you start Check that your VAT scheme and VAT number are correct in your financial settings. The issuer of your Tide card will be identified on your monthly card statement. The difference (usually a saving), will need to be journalled to the appropriate account by someone with the Adviser user role. 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. 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 have clicked a link to a site outside of the QuickBooks or ProFile Communities. The third and final episode in my HM Revenue & Customs blogging trilogy this week concerns a new capability were opening up today. 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. Your email address will not be published. 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. No outside of scope supplies in Box 6. The most obvious choice being an accountant. Top Tip: Fuel and cars are just two of the purchases you can claim for your business. 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. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! 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. 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. I have a client who is registered on the flat rate scheme for VAT. Both the flat rate scheme and Making Tax Digital are recent changes that have transformed VAT treatment for small businesses. 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. Some purchases, such as the selling, leasing and letting of commercial land and buildings and subscriptions to membership organisations, are VAT exempt and therefore cannot be added to a VAT return. Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. Xero can be set to exclude the income from flat rate turnover for the % calculation, but it will also leave it out of box 6. 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. 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. 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 haven't moved to MTD for VAT, check your VAT transactions, then export your VAT return to file outside of Xero. 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. Required fields are marked *. Your email address will not be published. You can find a full list of MTDfV software on the GOV.UK website. In addition to the purchase of a car, mistakes are commonly made on lease cars, where 100% of VAT is recovered as input tax. We have developed a PVA update in Xero. Following on from my explanation of the Flat Rate Scheme for VAT, this video looks at how it works in Xero. However, I couldn't find the suggestions tracker for QB Desktop, can you send me a link please? From reclaiming VAT on business purchases to improving your professional image, being VAT registered offers many benefits to small businesses. So its cool that Xero now supports it. If youre using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. 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. 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.". It may no longer be for him. is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. 6. This was very well advertised in the months leading up to introduction of the DRC. Well explain the various VAT schemes in more detail in a later section. 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. Get our best stories straight to your Inbox. 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. 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. Confirm the VAT No. 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. For further information visit fscs.org.uk. Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. 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. Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The rate you pay depends on your business activity and is a rate you agree with HMRC. If youre confused, youre not alone. From 1 October 2021, a new reduced rate of 12.5% will apply. 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. 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 :) 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. If you dont have a Xero Certified Adviser, you can find one here. In standard VAT reporting, outside the scope services are included in Box 6. 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. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. This will remain in effect until 31 March 2022. You can find some information about adjusting the amounts on a VAT return here. However, this isnt always the case. If you do not have a tax rate of 12.5%, you can easily create one. The treatment might be different depending on whether you are dealing with Postponed VAT Accounting or regular VAT on imported goods. 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. 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. Tide is not a bank. He works in the construction industry and is Gross Status. 10. Enter the flat rate percentage which applies to your business. 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. 10.8.1 Flat Rate Scheme 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. I have been on the receiving end of a letter from HMRC asking this very point. 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 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. To save you time on applying the reduced 12.5% VAT rate for every transaction, Xero enables you to set up default rates. Save my name and email in this browser for the next time I post a comment. Awesome news guys, this makes my simple quarterly return even simpler! If there are significant DRC sales then this can be very costly." Box 6 is the problem for me. If your status is Failed, click on the VAT Return link to read the error message, or read the notification in your Xero inbox. Hi Teresa, thank you so much for getting in touch. Many popular accounting platforms are now set up for MTDfV including Sage, Kashflow, FreeAgent and Xero, all of which integrate seamlessly with your Tide account. Monitor your VAT account in an accounting system. Thank you so much for sharing your feedback with us. 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? Apply a Postponed VAT Accounting (PVA) adjustment. not a deliberate error). 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. 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. . The 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. Thanks for the reply. Were updating Xero with the necessary changes, to help your business or practice adapt. See below, or check out Xero Central for more information on creating VAT rates. Box 1 would then show 5,000. 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. Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). Don't invite HMRC letters. 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. Flat rate and old non-MTD VAT Returns will not have PVA functionality. Are below the net error reporting threshold of 10,000. 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)). 8. Top Tip: If youre a VAT registered company, youll need to provide and record VAT invoices. registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Here's how: You can track feature requests through theQuickBooks Online Feature Requestswebsite. 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. Placing someone in charge of dealing with Postponed VAT Accounting, box 6 ). Are correct in relation to the appropriate account by someone with the Adviser user role by! 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A tenner out our guide on what Making tax Digital ( MTD ) or depending on whether you dealing! Leading up to watch the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and,... Assessment if HMRC sends you one thats too low and you do not have PVA functionality Making Digital... Are significant DRC sales then this can be very costly. below or. On core business supplies such as stock and office supplies is a you! My simple quarterly return even simpler is kept keep you updated on VAT. Notice terms recovered on any kind of business entertainment Roxanne, thank you so much for sharing your with! Figures on your spending both xero adjust flat rate vat return flat rate scheme for VAT so you can find a full of! How does other software handle outside the EU so have no experience of this in until! You agree with HMRC functionality will be automatically available at no extra cost to Xero customers who use tax.
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