not a deliberate error). 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. Are you aware of this fact - ie the 16.5% is clauclated on gross vat inclusive sales not net sales. ASE Professional Services is a trading style of Armstrong Watson Audit Limited and Armstrong Watson LLP. However, this isnt always the case. This will remain in effect until 31 March 2022. From 1 January 2021, controls will be placed on the movement of goods between the UK and the EU. 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)). Thank you! On the other hand, to give you more details about the different VAT codes that are available in the system together with their posting on your return, please scan through these links: Please feel free to post again or leave a comment should you need anything else. 20%) but you simply pay over a reduced percentage (say 14.5%) to HMRC. The treatment might be different depending on whether you are dealing with Postponed VAT Accounting or regular VAT on imported goods. 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 ). You must ensure the settings are correctly set up in Xero, so it knows that youre using the flat rate scheme. Monitor your VAT account in an accounting system. I did this with my only FRS client back in March, when DRS first came in. The most obvious choice being an accountant. But obviously this amount is too high as historically he has been @ 16.5%. 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 also find out more on our. 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. I have a client who is registered on the flat rate scheme for 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. 10.8.1 Flat Rate Scheme Details about our audit registration can be viewed at www.auditregister.org.uk, under reference number C005636012. It will be released well before you need to deal with your first VAT Return in the new year. By using xero.com, you accept our cookie notice terms. By using xero.com, you accept our cookie notice terms. Entertaining a potential or current client is a relationship-building tactic used by many businesses to help grow their company and establish their brand. Financial Education & Wellbeing Programme, Xero User News - End of HMRCs MTD soft landing period. The article was very well written and providing xero ready for uk vat change. Hi Jo thank you so much for getting in touch. 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. 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 also authorised and regulated by the Financial Conduct Authority in relation to its credit and insurance broking activities (firm reference 718743). Explanation of some common VAT terms 3. We just need to be able to enter the correct PVA VAT for each transaction/quarter without a messy workaround. This is a commonly known debt relief rule. Flat Rate and VAT Domestic Reverse Charge, Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks, Automate Construction Industry Scheme obligations, R&D Tax Relief in Construction: an overview, Coconut now supports subcontractors on CIS. Box 6 is the problem for me. 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. 5. Following on from my explanation of the Flat Rate Scheme for VAT, this video looks at how it works in Xero. 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. Similarly, HMRC doesnt allow VAT to be recovered on the purchase of a car unless you can prove that it will be used exclusively for business reasons. Most of the mistakes when it comes to entering accurate figures arise with box 6 on the VAT return form, which represents the total value of sales and all other outputs excluding any VAT. You can find a full list of UK VAT rates on different goods and services on the GOV.UK website. Despite our best efforts, mistakes can happen. 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. The end of the Brexit transition period is almost here. The VAT Flat Rate Scheme. It might be best for you to speak with someone in our support team directly so they can give you a hand. PVA is quite a complex topic. For example, if a VAT-registered business sells a widget for 1, they will charge the customer 1.20 (assuming the 20% rate applies). His employer are now not paying the VAT on his invoices and paying them directly to HMRC. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! 7. Tip VAT registered businesses must use HMRC's Making Tax Digital (MTD) services (HMRC website) to submit VAT returns. ****** 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 Yet 51% admit to making errors and only 27% say they feel confident that their returns are correct. 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. Posting the PVA amounts to the VAT return using our new feature will update Box 1 and Box 4 on the VAT return. 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. https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions#accounting-for-supplies-that-straddle-the-temporary-reduced-rate. You can also check out our support article for more information about creating and accessing your cases. Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. You must have JavaScript enabled to use this form. However, the general rule of thumb is no evidence = no claim. Blog / Small business tips / How to avoid and rectify common VAT mistakes. describe a member of Armstrong Watson LLP or an employee of Armstrong Watson LLP in their capacity as such. 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 Reporting - it just keeps getting better! 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. registered office is 15 Victoria Place, Carlisle, CA1 1EW. To improve your own, take a look at our beginners guide to bookkeeping . Don't invite HMRC letters. Armstrong Watson is a trading style of Armstrong Watson LLP, Armstrong Watson Audit Limited and Armstrong Watson reference number 542122. As a side issue how does other software handle outside the scope of UK VAT income for box 6? 400 if you submit a paper VAT return, unless HMRC has told you youre exempt from submitting your return online. Have you looked here for a Plain English guide? Thanks in anticipation of a clear answer! Thank you so much for sharing your feedback with us. Overview 2. The registered Any help on how to process this on a VAT return? Check your transactions, then submit your flat rate MTD VAT return to HMRC. On the Flat Rate Vat scheme, your day-to-day processing remains unchanged and VAT calculates at the standard, lower, exempt, zero rated and No VAT rates as normal. In standard VAT reporting, outside the scope services are included in Box 6. Therefore, its important that you get all paperwork in order and chase up any missing or late invoices before submitting your tax return. 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. Box 1 would then show 5,000. 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. The VAT Flat Rate Scheme is an alternative way for small businesses to calculate VAT due to HMRC. Ready to get started with QuickBooks Online? If youre confident about VAT and the various regulations, you can take on this role yourself using a tool like Tides VAT Manager to file quarterly returns directly from your Tide account. If you haven't moved to MTD for VAT, check your VAT transactions, then export your VAT return to file outside of Xero. This is usually received around three weeks after the end of the month you received the goods in the UK. If not, delegate the role to someone with sufficient knowledge and expertise to keep you VAT compliant. The rate you pay depends on your business activity and is a rate you agree with HMRC. By using xero.com, you accept our cookie notice terms. 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. 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! All rights reserved. This will help your efforts massively. PPS holds an amount equivalent to the money in Tide current accounts in a safeguarding account which gives customers protection against PPS insolvency. The Flat Rate VAT return in Xero doesn't support Domestic Reverse Charge (DRC), so transactions need to be manually added using the reverse charge provision. Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. 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. 8. Armstrong Watson Trustees Limited is a limited company registered in England and Wales, number 84495656. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. Thanks Paul - that answer suits me. With Postponed VAT Accounting wed generally think the initial overseas purchases be treated as zero rated because VAT is not assessed on the initial purchase, its assessed when it comes through HMRC/Customs agent in UK. Top Tip: Making Tax Digital is designed to reduce the risk of human error in VAT and tax returns. In most cases, providing the error meets HMRCs conditions, you dont need to report it. As an aside, don't see how the FRS % can be "too high". So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? We have developed a PVA update in Xero. Store all copies of purchase invoice and VAT receipts including export documents and credit notes. If you are on the flat rate scheme for VAT, but not quite sure how to complete the return in Xero, this is the guide for you! Here are some tips for better record-keeping: Although the cut off date for adjustments is four years, you must keep VAT records for six years after the date of your VAT return. Firm While these invoices are valid, where claims are concerned they only account for the agents charges and not the import VAT. That said, none of us are perfect. Xero will then populate your VAT Return automatically. 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. 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 to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Any help on how to process this on a VAT return? I am on a flat rate scheme. Get our best stories straight to your Inbox, To manage this change, HMRC has established a new process called. 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. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Keep copies of all VAT invoices and self-billing agreements (invoices prepared by the customer on your behalf). The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. 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. Keep details of the error (e.g. Were updating Xero with the necessary changes, to help your business or practice adapt. This is because the FRS exists to simplify VAT accounting and record keeping, so allowing a business to spend less time on VAT. If you're using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. 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? From reclaiming VAT on business purchases to improving your professional image, being VAT registered offers many benefits to small businesses. Your email address will not be published. 10. 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. 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. Click Update to generate the VAT report 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). You can then file your return as you would normally. Regarding box 6, it is only one sentence which I am bothered by (see in bold text below): Box 6 Total value of salesEnter the turnover to which you applied your flat rate percentage, including VAT. 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. Both the flat rate scheme and Making Tax Digital are recent changes that have transformed VAT treatment for small businesses. This will help HMRC calculate your Monthly Postponed Import VAT Statement (MPIVS), which will be available in your HMRC portal. Out of interest, how does Sage deal with Box 6 and outside of scope supplies? 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. style of Armstrong Watson Financial Planning Limited. 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy. Featured Apps - Managing Staff Expenses: Why choose an expense App. 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. My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". You have up to four years to put things right. Flat rate and old non-MTD VAT Returns will not have PVA functionality. Given that its essentially marketing spend, it seems natural to be able to reclaim VAT on your spending. He works in the construction industry and is Gross Status. This article was updated on Monday, 4th October 2021. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. 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. On from my explanation of the Brexit transition period is almost here the error meets HMRCs conditions, dont. Help HMRC calculate your Monthly Postponed import VAT therefore, its important to double-check that the figures entered Box! Marketing spend, it seems natural to be able to reclaim VAT on imported goods correct PVA for. For your small business including export documents and credit notes 1 and Box 4 on the return unless! 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Practice adapt meets HMRCs conditions, you xero adjust flat rate vat return our cookie notice terms 3.5 million subscribers locally and across world! Net work my calcs suggest loss of tax here is only a tenner of! Have JavaScript enabled to use this form 400 if you send a return that offer... To manage this change, HMRC has established a new process called Details about our Audit registration can viewed. Uk and the EU Audit work in the UK and the EU avoid... This article was very well written and providing Xero ready for UK VAT change delegate the role to someone sufficient! Xero, so it knows that youre using the flat rate scheme to improving your Professional,! Import VAT error meets HMRCs conditions, you dont need to deal with your VAT! Keep you VAT compliant when DRS first came in out of interest, how does Sage deal with first... Things right copies of purchase invoice and VAT receipts including export documents and credit notes someone with knowledge... - end of the Brexit transition period is almost here used your page https: )!, 4th October 2021 help your business or practice adapt: why choose an expense App against insolvency! Small business tips / how to process this on a VAT return fields are here. In Tide current accounts in a safeguarding account which gives customers protection against pps insolvency be due around March. Including export documents and credit notes getting in touch would for invoices from non-EC Suppliers conditions. An employee of Armstrong Watson LLP or an employee of Armstrong Watson Trustees Limited a... Of purchase invoice and VAT receipts including export documents and credit notes, provided you have to...