Flat Rate scheme removal

[willtfrank]

We are moving from Flat Rate scheme from a specific date in August and wondered what actions I should take beyond removing the tick in the flat rate settings box. Only a subset of invoices in the last VAT period are involved I can’t see how to reflect that.

Thanks in advance

[ian_roberts]

QuickFile isn’t really set up for joining or leaving the flat rate scheme in the middle of a VAT period - the flat rate calculations are done at the point where you submit the VAT return, they’re not handled on a running basis, and the checkbox is just to tell QuickFile whether to use standard or flat rate rules when calculating the next return.

If you must switch mid quarter then you should definitely take advice from your accountant to make sure you get it right, it will involve some sort of manual adjustment to your return.

The HMRC notice on the FRS says

If you wish to leave the scheme you must write and tell HMRC. We would expect that most businesses will leave at the end of an accounting period. However, you may leave voluntarily at any time during an accounting period.

[…]

If you stop using the scheme in the middle of a VAT accounting period

Then you must do 2 calculations when you complete your next VAT Return, the first calculation will be for the portion of the period you used the scheme, the other calculation will be for the rest of the period, using normal VAT rules.

This will give you 2 sets of figures for the period you stop using the scheme. Add these together when you complete your VAT Return.

So once you’ve entered everything for the changeover quarter you’d need to

• prepare (but not submit) a QuickFile vat return with the FRS box ticked, and export the calculations
• untick the FRS box and prepare another vat return for the same quarter without flat rate, and export those calculations too
• open up the two exports in a spreadsheet, remove all the items after the changeover date from the FRS one and before the changeover date from the non-FRS one, and recalculate the box values using the relevant rules for each scheme
• add the values from the two sets of calculations to work out what you actually need to submit for each box
• double check all your calculations with your accountant…

Once you know it’s right, prepare the final version of your return and make manual adjustments to make it match the calculated values. Any discrepancy between the original and adjusted values of box 5 (actual VAT owed) will be put on the “manual adjustments” nominal from where you’ll then need to journal to flat rate sales adjustment.

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Edit: this all assumes you’re not also switching from cash to accrual accounting or vice versa at the same time, if you are it gets more complex still…

[willtfrank]

Many thanks for this most extensive response.