The scheme isn't to save VAT registered business money, but to save them the hassle of keeping proper records. It may no longer be for him. 5. not a deliberate error). Click the VAT Audit Report tab to see all the transactions making up totals on the VAT Return. You alone are responsible for figuring out if you sell any items that fall into these categories, what amount of VAT to charge if you do and exactly how to report those special cases. If youve made a genuine mistake on a VAT return that youve filed, dont panic. If you realise youve entered the wrong figures on your VAT return, try not to stress. By knowing where mistakes often take place you can easily avoid making them yourself. From 1 October 2021, a new reduced rate of 12.5% will apply. PVA is quite a complex topic. Errors that exceed the threshold must be reported and cannot be adjusted on a future VAT return. You charge your customers at the appropriate rate (e.g. 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 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. The figure he needs to put on the VAT return is amount of his sales including VAT (which are 0% rated on the DRC invoices). 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). The first VAT Return that will offer PVA will be due around 7 March 2021, for any period ending 31 January 2021. Click Update to generate the VAT report To find out more about how it works, check out our guide on what Making Tax Digital means for your small business. 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. As a side issue how does other software handle outside the scope of UK VAT income for box 6? 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. Notice 735 Check the Include VAT Late Claims box to include late claims on the return, provided you have published your previous periods return. This article was updated on Monday, 4th October 2021. Well continue to keep you updated on the latest changes to Xero, so you can focus on your business. Do you have a question about self-assessment or anything else? This means that she over-claimed VAT in the amount of 300 in the VAT period ending March 31st. Shout out to StartUpAcc for the reminder. 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. Armstrong Watson is a trading style of Armstrong Watson LLP, Armstrong Watson Audit Limited and Armstrong Watson Shout out toStartUpAccfor the reminder. But obviously this amount is too high as historically he has been @ 16.5%. 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. Thanks Paul - that answer suits me. 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. Do I need to charge VAT to client for Freelancer? Before that, businesses can choose to voluntarily register, though there are pros and cons to that decision. But the rule has another side that often goes overlooked: you cant claim bad debt relief until after six months from the due date. Thanks in anticipation of a clear answer! 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. 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. That's what the bit of the manual you quoted says, a retrospective withdrawal should be refused when the date requested falls within a return period that has already been filed. 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 :) 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. Have you looked here for a Plain English guide? Youll need to make sure you include your EORI and VAT registration number on your customs declaration. Box 1 would then show 5,000. You can also find out more on our Brexit Hub. PPS holds an amount equivalent to the money in Tide current accounts in a safeguarding account which gives customers protection against PPS insolvency. But obviously this amount is too high as historically he has been @ 16.5%. This walkthrough guides you Your email address will not be published. You should review this fella's VAT liability immediately. you are using is correct, enter your Gateway User ID and password, and click the File & Publish button on the File VAT Return screen. Hello Klous1, thanks for coming back to us here. 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. That said, I'd encourage you to send feedback or product suggestions from QBO where they will be sent directly to our engineers. 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 then file your return as you would normally. As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry. The new functionality will be automatically available at no extra cost to Xero customers who use Making Tax Digital (MTD) or the new non-MTD VAT. By keeping your finances in order and all VAT related paperwork organised, mistakes can easily be rectified on future returns. "As outside the scope they have, by definition, not been "accounted for" They mean accounted for as a VAT entry.". As an aside, don't see how the FRS % can be "too high". 2023 Xero Limited. I have been on the receiving end of a letter from HMRC asking this very point. 10.8.1 Flat Rate Scheme Griffin is the trading name of Griffin Audit Limited. Tide Cards may be issued by both Tide and PPS, who are licensed by Mastercard International for the issuance of cards. Website by Simon Pighills. All rights reserved. Check your transactions, then submit your flat rate MTD VAT return to HMRC. 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. for more information about creating and accessing your cases. Get our best stories straight to your Inbox, To manage this change, HMRC has established a new process called. 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) !! No outside of scope supplies in Box 6. 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. Thanks, Joanne. Following on from my explanation of the Flat Rate Scheme for VAT, this video looks at how it works in Xero. for more information on creating VAT rates. 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. Further, there are several goods and services that are either VAT exempt (or qualify for partial exemption), out of the scope of VAT entirely, or charged at a reduced-rate or zero-rate. Check the status of your filed VAT return with HMRC. I'll be happy to help. The exception will notify HMRC that the transaction has been accounted for within the current period but refers to a previously filed period. The Information on the tax rates that can be used to populate certain VAT return fields are available here in Xero Central. Visit our dedicated site for more resources, webinars and updates to help you navigate the COVID-19 pandemic. 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. 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. 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. You can find a full list of MTDfV software on the GOV.UK website. reference number 542122. Errors of more than 10,000, up to a maximum of 50,000 can also be adjusted if the error is not more than 1% of the figure entered in box 6. By using xero.com, you accept our cookie notice terms. However, this isnt always the case. invoices and receipts) so that you can easily pinpoint figures. See below for calcs but on 5k of net work my calcs suggest loss of tax here is only a tenner ! You can simply correct it by making adjustments on your next VAT return. Tip We have separate instructions for our standard rate MTD VAT return and non-MTD VAT return. Financial Planning Limited. Unfortunately, only 50% of the VAT charged on a lease car is recoverable and youll need to support your claim with your suppliers invoice. Scope of UK VAT income for box 6 amount is too high as he. Finances in order and all VAT related paperwork organised, mistakes can easily figures... For a Plain English guide video looks at how it works in Xero Central stories straight your... Too high as historically he has been @ 16.5 % work my calcs suggest loss of tax here only! Frs % can be `` too high as historically he has been @ 16.5.. 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