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. 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. The 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. He works in the construction industry and is Gross Status. You have up to four years to put things right. We use cookies to make your experience better. 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. Youll need to make sure you include your EORI and VAT registration number on your customs declaration. That said, none of us are perfect. Ready to get started with QuickBooks Online? 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 . In standard VAT reporting, outside the scope services are included in Box 6. trading 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. By subscribing you agree to receive marketing communications from Tide. Armstrong Watson is a trading style of Armstrong Watson LLP, Armstrong Watson Audit Limited and Armstrong Watson VAT, or value-added tax, is relatively straightforward in theory. The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. Have you looked here for a Plain English guide? See below, or check out Xero Central for more information on creating VAT rates. 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. registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. 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. 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. If you're using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. 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. 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 ). Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. 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? Top Tip: You have to register for VAT when you reach the VAT threshold. All content 2020 Armstrong Watson. Charging VAT on core business supplies such as stock and office supplies is a regular occurrence. 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. 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. This ensures the postponed VAT amounts required by HMRC are handled correctly. 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. 30% of an assessment if HMRC sends you one thats too low and you do not tell them its wrong within 30 days. Get up to speed on what information you must include on your VAT invoice . 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. The most common mistake made with import VAT is reclaiming VAT on receipt of invoices from shipping agents. You can find a full list of UK VAT rates on different goods and services on the GOV.UK website. Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. Where VAT becomes more complicated is when it comes time to file your VAT return. I hope that helps. We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. In most cases, providing the error meets HMRCs conditions, you dont need to report it. This was very well advertised in the months leading up to introduction of the DRC. I'll be happy to help. https://www.accountingweb.co.uk/tax/hmrc-policy/domestic-reverse-charge- DRC transactions are not included in the flat rate calculation, so its not a case, like zero ring, where you end up paying over VAT for something that isn't VATable. Shout out toStartUpAccfor the reminder. Thanks Paul - that answer suits me. 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. 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. 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. Monitor your VAT account in an accounting system. The exception will notify HMRC that the transaction has been accounted for within the current period but refers to a previously filed period. Take care always, @klous1. This is because it has been sent to HMRC but they havent processed it yet. 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. 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. 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. 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 end of the Brexit transition period is almost here. 2023 Xero Limited. Thanks! 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. They are on hand to answer any questions you may have about opening a Tide account or any of our products, 9am - 6pm daily. 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. A number of the VAT mistakes weve covered in this post come from poorly maintained records. However, reaping the rewards whilst staying VAT compliant relies on you completing accurate VAT returns a task that isnt always straightforward. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! Thank you so much for sharing your feedback with us. I am on a flat rate scheme. Once you are registered with HMRC, they will give you a rate. 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). Shout out to StartUpAcc for the reminder. Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. . you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. how it happened, the date it was discovered and the amount of VAT involved), Include the value of the error in your VAT account. You may wish to ask your adviser to do this sense check for you. For example, if a VAT-registered business sells a widget for 1, they will charge the customer 1.20 (assuming the 20% rate applies). You can find a full list of MTDfV software on the GOV.UK website. 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. This table explains each scheme in more detail. Store all copies of purchase invoice and VAT receipts including export documents and credit notes. Get our best stories straight to your Inbox, To manage this change, HMRC has established a new process called. Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks. Click the File VAT Now button at the bottom of your VAT Return. 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. Flat rate and old non-MTD VAT Returns will not have PVA functionality. Notice 733, section 7.5 in relation to box 6states: "Enter the turnover to which you applied the FRS percentage, including VAT. Apply a Postponed VAT Accounting (PVA) adjustment. 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.". Purchases Record all your purchases as No VAT. 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. By clicking "Continue", you will leave the community and be taken to that site instead. From 1st June 2022 businesses using the flat rate scheme for VAT face changes to the way in which they must treat import VAT that will have financial and practical implications for how they prepare VAT Returns. Explanation of some common VAT terms 3. Box 1 would then show 5,000. Because these purchases are included in every VAT return, mistakes rarely happen. In this video I show you how to do a VAT return in Xero.Its not just 5 clicks, you also need to do some checking before you submit the return.I show you step by step how to do these.The example in this video is for the Accrual/Standard VAT scheme2019 UPDATEThe Xero menus have been updated since this video was recorded.To access Financial Settings from the Dashboard you now choose:AccountingAdvancedFinancial SettingsTo access the VAT Return from the Dashboard you now choose:AccountingReportsTax - VAT ReturnTo access the Trial Balance Report from the Dashboard you now choose:AccountingReportsAccounting - Trial BalanceIn the UK you also need to be aware of the new rules for Making Tax Digital.You can read everything you need to know herehttps://www.xero.com/uk/resources/making-tax-digital/ Small businesses name Xero the most-loved accounting software for the second year in a row, Heres the more specific link to Gov.uk guidance on this https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions#accounting-for-supplies-that-straddle-the-temporary-reduced-rate. 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