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. 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. To improve your own, take a look at our beginners guide to bookkeeping . By understanding the three main VAT schemes for small businesses, youll be able to choose the one thats right for your business and ensure the figures on your VAT return are correct. ". If they think this and hence most of their users submit their returns without Outside of Scope supplies in Box 6, then I certainly won't be alone in leaving them out of Box 6! Tide Platform Limited (Tide) designs and operates the Tide website and app. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! Accountants in England and Wales. 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. Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. 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. PPS holds an amount equivalent to the money in Tide current accounts in a safeguarding account which gives customers protection against PPS insolvency. 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. We are using QB Desktop as per the tag. Your email address will not be published. This walkthrough guides you How to do a VAT Return in Xero XU Academy 6.4K subscribers Subscribe 514 Share 34K views 4 years ago VAT in Xero In this video I show you how to do a VAT return in Xero. Were updating Xero with the necessary changes, to help your business or practice adapt. How the flat rate MTD VAT return works Run your flat rate MTD VAT return Shout out to StartUpAcc for the reminder. 10. invoices and receipts) so that you can easily pinpoint figures. Because these purchases are included in every VAT return, mistakes rarely happen. You can't come off flat rate retrospectively as HMRC would see that as you trying to gain an advantage (ie, if you do a few months realise you're better off being on flat rate or normal VAT then if you could go back in time then you'd be better off and this is what HMRC don't like), so you can come off flat rate before filing the next return - for example if your Qtr was say Jul-Aug-Sept, you can change at start of July as you've not filed that return as yet and would make the Jul-Aug-Sept, so you could come off flat rate or join flat rate (depending on what scheme you're already on). You have up to four years to put things right. Find out why 3.5 million subscribers locally and across the world trust Xero with their numbers. Hi Jo thank you so much for getting in touch. The difference (usually a saving), will need to be journalled to the appropriate account by someone with the Adviser user role. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. PVA is quite a complex topic. 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. How it works If youre using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. VAT (value-added tax) is a tax on the sales of goods and services paid by consumers. You must have JavaScript enabled to use this form. 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. You can then file your return as you would normally. HMRC expects to see detailed mileage records to support a claim, unless records are too difficult to maintain, in which case youre able to pay a scale charge as output tax to account for fuel youve used for personal travel. The Top Tip: You have to register for VAT when you reach the VAT threshold. If you realise youve entered the wrong figures on your VAT return, try not to stress. registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. This is because the FRS exists to simplify VAT accounting and record keeping, so allowing a business to spend less time on VAT. Click Update to generate the VAT report Registered as a limited company in England and Wales, number 7208672. Tip VAT registered businesses must use HMRC's Making Tax Digital (MTD) services (HMRC website) to submit VAT returns. The changes associated with Brexit can be overwhelming, but were here to make them as easy as possible for you. HMRC has announced a change to its current temporary reduced rate of VAT for hospitality, holiday accommodation and attractions industries. Tide Cards may be issued by both Tide and PPS, who are licensed by Mastercard International for the issuance of cards. Top Tip: If you dont already have an accountant and arent sure how to find the right one for your business, read our guide to choosing an accountant for your small business . 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 :) And I'm now intrigued to know if the FRS VAT return I've just submitted now is technically wrong (though no tax loss). PVA gives you the option to account for and recover VAT on your imported goods using the same VAT Return form. 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. 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. Small businesses name Xero the most-loved accounting software for the second year in a row. Thanks, Joanne. 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 !! 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). A common VAT return mistake is when fuel purchased for personal use is claimed alongside fuel purchased for business travel, which often happens when a vehicle has dual business and personal use. 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. 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 ). Clear Books and Xero both agree it should not be in Box 6 it appears. I'll be happy to help. 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. 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. Website by Simon Pighills. registered office is 15 Victoria Place, Carlisle, CA1 1EW. 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. Your email address will not be published. The new flat rates for types of businesses can be found on the HMRC website. From 1 October 2021, a new reduced rate of 12.5% will apply. 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). Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks. 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. Thanks Paul - that answer suits me. Xero will then populate your VAT Return automatically. 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. 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. About adjusting your VAT return Adjust the VAT box amount only Adjust the VAT box amount by adding an accounting transaction The VAT Flat Rate Scheme. The issuer of your Tide card will be identified on your monthly card statement. I have a client who is registered on the flat rate scheme for VAT. A number of the VAT mistakes weve covered in this post come from poorly maintained records. 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. You can also check out our support article for more information about creating and accessing your cases. Make sure to highlight every new or unusual transaction so that you can be sure that its given the correct treatment. If you're using cash or standard VAT accounting, box 6 will be your income net of VAT, so 25,000. This will help your efforts massively. Just had a client investigated. 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. Instead, the VAT due on imports should be added to box 1 of the VAT Return after the flat rate calculation has been completed. 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. 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. It will be released well before you need to deal with your first VAT Return in the new year. Thanks to the author for sharing such a great post. https://www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-no Interco transaction on asset under construction, Filing options for small companies up for change. You have clicked a link to a site outside of the QuickBooks or ProFile Communities. However, the general rule of thumb is no evidence = no claim. The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. 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. I am on a flat rate scheme. 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. Enter the flat rate percentage which applies to your business. Label trading records by document (e.g. We just need to be able to enter the correct PVA VAT for each transaction/quarter without a messy workaround. Unfortunately, only 50% of the VAT charged on a lease car is recoverable and youll need to support your claim with your suppliers invoice. We have separate instructions for our MTD VAT return or Flat rate MTD VAT return. 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. Reporting - it just keeps getting better! To save you time on applying the reduced 12.5% VAT rate for every transaction, Xero enables you to set up default rates. registered office is 15 Victoria Place, Carlisle, CA1 1EW. 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 have a client who is registered on the flat rate scheme for VAT. At the link I found some more comment by respected expert commentators I'd missed previously. 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. Reporting - it just keeps getting better! You must ensure the settings are correctly set up in Xero, so it knows that youre using the flat rate scheme. So I should post invoices received from EC Suppliers with VAT Code Zero Rated Expenses as I would for invoices from non-EC Suppliers? Expert guide to CIS and new reverse charge rules, Getting started with client engagement letters, A fool-proof marketing strategy for accountants. reference number 542122. From 1 October 2021, a new reduced rate of 12.5% will apply. Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. 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. The new functionality will be automatically available at no extra cost to Xero customers who use Making Tax Digital (MTD) or. 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. 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. 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. ClearBank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 754568. 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. 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. trading Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. 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. QUOTE: "My initial interpretation is that Outside of Scope supplies would count as "supplies accounted for outside the Flat Rate Scheme". Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. You should review this fella's VAT liability immediately. . ****** 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 You then reclaim VAT from your suppliers' invoices, whether or not you have paid the bill. Ready to get started with QuickBooks Online? Hi were thrilled to hear that you found our article interesting. Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. 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. Will I still be able to use Xero for MTD when I buy from EU? There are also practical considerations as to how your accounting software will deal with the change and how you prepare the VAT Return. 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/ Easy as possible for you charge rules, getting started with client engagement letters, new! Getting started with client engagement letters, a new reduced rate of 12.5 % will apply the issuer of Tide! 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Up no problem, thanks ( we used your page https: //www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-no Interco transaction on asset under,. And Wales, number 7208672 cons to that decision a client who is on. Applying the reduced 12.5 % will apply money in Tide current xero adjust flat rate vat return in a.... Vat Audit report tab to see all the transactions Making up totals on the sales of goods services! File your return as you would normally for more information about creating and accessing cases! The issuer of your Tide card will be automatically available at no extra cost to Xero customers who use tax! Mistakes rarely happen VAT threshold entered the wrong figures on your monthly card statement calcs loss. On asset under construction, Filing options for small companies up for change second!, holiday accommodation and attractions industries trading information on the return, provided you have to register for VAT file. 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