This walkthrough guides you Tide is about doing what you love. This article was updated on Monday, 4th October 2021. You can unsubscribe anytime using the link in the footer of any of our emails.See our privacy policy. Supplies that the reverse charge applies to are excluded from the Flat Rate Scheme. Your email address will not be published. All content 2020 Armstrong Watson. Youll then be notified of whether the amount you calculated is correct and how much interest or tax you owe. 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) !! I am on a flat rate scheme. If youre confused, youre not alone. Just had a client investigated. You can only reclaim import VAT on receipt of an official import VAT certificate (C79) from HMRC. Do I need to charge VAT to client for Freelancer? 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. Apply a Postponed VAT Accounting (PVA) adjustment. 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. You charge your customers at the appropriate rate (e.g. Required fields are marked *. 10.8.1 Flat Rate Scheme At that point I stop looking and, of all things, would not start with OTS transactions. 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? Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. He may well need to leave the FRS. You'll need to make sure you include your EORI and VAT registration number on your customs declaration. 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. They will then pass on the VAT they collect to the government, typically on a quarterly basis, via a VAT Return. 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. ASE Professional Services is a trading style of Armstrong Watson Audit Limited and Armstrong Watson LLP. Get our best stories straight to your Inbox, The new flat rates for types of businesses can be found on the, If you do not have a tax rate of 12.5%, you can easily create one. It may no longer be for him. How it works Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. Thanks Paul - that answer suits me. 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. You can correct errors on any VAT return that relates to an accounting period that ended within the last four years if they: Making an adjustment is a straightforward process that you can do in one of two ways: For example, lets say a small business owner called Rachel is VAT registered under the standard VAT scheme and submits VAT returns every quarter. This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. Xero will then populate your VAT Return automatically. . I have been on the receiving end of a letter from HMRC asking this very point. 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. 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. 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. 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. 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. is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business 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. 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. It will be released well before you need to deal with your first VAT Return in the new year. 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 ; ). If you have any questions or need support, dont hesitate to reach out to our support team who are available 24/7. This is a commonly known debt relief rule. 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. Thanks! From 1 October 2021, a new reduced rate of 12.5% will apply. 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. 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. 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. To join the flat rate scheme your turnover must be 150,000 or less (excluding VAT), and you must apply to HMRC. Simply enter in your Percentage Rate into our new Flat Rate VAT Return and Xero will calculate the right amounts for you. 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. 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. Because these purchases are included in every VAT return, mistakes rarely happen. That said, none of us are perfect. This is usually received around three weeks after the end of the month you received the goods in the UK. 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. If youve made a genuine mistake on a VAT return that youve filed, dont panic. See below, or check out Xero Central for more information on creating VAT rates. And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). we might record 25 VAT on a 110EUR (90) bill.Therefore, we need to make these VAT adjustments as our VAT return MUST agree with the PVA statement (so I'm told).Do Quickbooks plan to create similar functionality as Xero to allow easy posting of PVA VAT adjustments?Thanks! 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. Get our best stories straight to your Inbox, To manage this change, HMRC has established a new process called. Required fields are marked *. Hi Astra, thanks so much for getting in touch. Reporting - it just keeps getting better! If you dont have a Xero Certified Adviser, you can find one here. Confirm the VAT No. how it happened, the date it was discovered and the amount of VAT involved), Include the value of the error in your VAT account. Monitor your VAT account in an accounting system. Armstrong Watson Audit Limited is registered to carry on audit work in the UK by the Institute of Chartered 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. 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 :) By using xero.com, you accept our cookie notice terms. You may wish to ask your adviser to do this sense check for you. If you lose paperwork or it gets damaged, ask the supplier to provide a duplicate. Firm If you realise youve entered the wrong figures on your VAT return, try not to stress. Registered as a limited company in England and Wales, number 8800970. Stay abreast of any developments through reputable sources like the GOV.UK website, news websites and blogs like this one to ensure you dont fall foul of VAT errors. Perhaps other software has a VAT flag for supply of overseas services. 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. 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? However, this isnt always the case. You must ensure the settings are correctly set up in Xero, so it knows that youre using the flat rate scheme. To contact us, simply click the Help icon at the upper right hand corner of the screen while youre logged into Xero. This means that she over-claimed VAT in the amount of 300 in the VAT period ending March 31st. The article was very well written and providing xero ready for uk vat change. It will be released well before you need to deal with your first VAT Return in the new year. 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. MyRetirement is a trading style of Armstrong Watson Financial Planning Limited. 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. Box 6 is the problem for me. 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. 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. How the flat rate MTD VAT return works Run your flat rate MTD VAT return 10. 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. Have you looked here for a Plain English guide? . 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. If there are significant DRC sales then this can be very costly. 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. You can find some information about adjusting the amounts on a VAT return here. Do you have a question about self-assessment or anything else? The 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. I would go along with that. By using xero.com, you accept our cookie notice terms. You can also find out more on our Brexit Hub. 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. You have up to four years to put things right. Exempt from submitting your return online apply a Postponed VAT Accounting ( PVA ) adjustment less excluding!, simply click the help icon at the appropriate rate ( e.g you have a question self-assessment! Registration number on your VAT return that youve filed, dont hesitate to reach out our... Correct and how much interest or tax you owe xero adjust flat rate vat return more information creating. 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