To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. 2023 Xero Limited. 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. 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 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. You can simply correct it by making adjustments on your next VAT return. Tide offers bank accounts provided by ClearBank Ltd (ClearBank) (account sort code is 04-06-05). Website by Simon Pighills. 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 -. Allowing a business to withdraw from a retrospective date in these circumstances would undermine the purpose of the scheme". This will help your efforts massively. 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)). 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. 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. 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. 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. Hi Alan, thanks for your comment. Box 6 is not only FRS turnover alone, which some sources state it is. Flat rate and old non-MTD VAT Returns will not have PVA functionality. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. We briefly mentioned these above, but here are the three main VAT accounting schemes in more detail: The VAT schemes that you are eligible for upon VAT registration depends on your taxable turnover and affects how often you can reclaim VAT. Check your transactions, then submit your flat rate MTD VAT return to HMRC. The end of the Brexit transition period is almost here. 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. 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. Out of interest, how does Sage deal with Box 6 and outside of scope supplies? Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. Any help on how to process this on a VAT return? Were updating Xero with the necessary changes, to help your business or practice adapt. 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. You have up to four years to put things right. 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. All content 2020 Armstrong Watson. I'll be happy to help. Our monthly bulletin INSPIRED is packed with useful articles to keep you up to date with news and legislation that may affect you or your business. We should all now know that Outside of Scope applies are not included in FRS turnover. MyRetirement is a trading style of Armstrong Watson Financial Planning Limited. trading Top Tip: Good bookkeeping helps you keep tabs on your day-to-day financial data, monitor your cash flow and evaluate your success. 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. for more information about creating and accessing your cases. So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? Shout out toStartUpAccfor the reminder. This will remain in effect until 31 March 2022. 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. Thanks! Tide Platform Limited (Tide) designs and operates the Tide website and app. If youre using the flat rate VAT scheme, the amount entered into box 6 should be the gross income youve applied the flat VAT percentage to. Create a folder that contains copies of your VAT certificate, submitted VAT returns and all correspondence with HMRC. This means that she over-claimed VAT in the amount of 300 in the VAT period ending March 31st. Therefore, its important that you get all paperwork in order and chase up any missing or late invoices before submitting your tax return. Top Tip: If youre a VAT registered company, youll need to provide and record VAT invoices. Xero displays filed returns under the Filed with HMRC tab and shows the return as Pending. Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. You may wish to ask your adviser to do this sense check for you. Box 1 would then show 5,000. ". Do you have a question about self-assessment or anything else? But obviously this amount is too high as historically he has been @ 16.5%. Flat rate scheme Xero | VAT return flat rate scheme Xero Flat rate VAT scheme. Thank you so much for sharing your feedback with us. Reporting - it just keeps getting better! 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. This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. 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)). 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. You'll need to make sure you include your EORI and VAT registration number on your customs declaration. ASE Professional Services is a trading style of Armstrong Watson Audit Limited and Armstrong Watson LLP. We are using QB Desktop as per the tag. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! The issuer of your Tide card will be identified on your monthly card statement. You must have JavaScript enabled to use this form. Overview 2. Purchases Record all your purchases as No VAT. 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. - 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. 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. The registered 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. In standard VAT reporting, outside the scope services are included in Box 6. 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. No accounting transactions required. You can then file your return as you would normally. 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. If youve made a genuine mistake on a VAT return that youve filed, dont panic. No outside of scope supplies in Box 6. 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. It may no longer be for him. 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. 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. 6.3 says to exclude OTS transactions from the FRS turnover and 4.1 tells you what to include in FRS box 6, on top of FRS turnover. Although I think you may be being a little harsh on our green friends. We have developed a PVA update in Xero. 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. Save my name and email in this browser for the next time I post a comment. 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? You can only reclaim import VAT on receipt of an official import VAT certificate (C79) from HMRC. To contact us, simply click the Help icon at the upper right hand corner of the screen while youre logged into Xero. The new rate should be used instead of the 5% reduced rate that is in effect until 30 September 2021. 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. 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. Simply enter in your Percentage Rate into our new Flat Rate VAT Return and Xero will calculate the right amounts for you. 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. 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). 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. 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. Despite our best efforts, mistakes can happen. Accountants in England and Wales. Keep details of the error (e.g. This will remain in effect until 31 March 2022. 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. Your email address will not be published. Because these purchases are included in every VAT return, mistakes rarely happen. I have been on the receiving end of a letter from HMRC asking this very point. All Rights Reserved. Were very pleased, too. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. 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