We got a purchase Invoice with two lines, the first line is an article where 20% VAT rate has been applied but then the second line is carriage where VAT is 0%. When we do the VAT return, the full amount is included as a standard rate purchase but then the VAT amount doesn’t match the 20% as is just for a small part of the Invoice. How do I categorized just the second line of the Invoice as exempt?
When you say “the full amount is included as a standard rate purchase” what exactly do you mean? Zero-rated purchase lines are supposed to be counted in box 7, but they don’t make any contribution to box 4, so box 4 should be less than 20% of box 7 in this case.
At the end of the day, what matters is that the total net and total VAT you record in QuickFile matches up with what the supplier’s invoice says.
Thanks for your reply, what I mean is that the Box 4 is not the 20% of box 7 because the system is taking the full net amount as standard rate purchase 20% instead of excluding the zero rated portion of the Invoice and HMRC is flagging me that discrepancy. Is there any way to select just one line of an Invoice as exempt?
Where are you seeing this flagged? I’ve not seen that happen, and my box 4 is routinely way below 20% of box 7 (because about three quarters of the stock I buy is zero rated food). It would only be a problem if your box 4 was more than 20% of box 7.
The discrepancy is flagged by the HMRC on their website when I submitting the returns, have you got the same message?
Not that I’ve noticed but I’ve never submitted a VAT return on the HMRC website, I’ve always done them direct from QuickFile. What is the wording? Is it actually refusing to let you submit at all or is it just an “are you sure you haven’t missed something” prompt? Maybe it depends what kind of business you are, if they expect food retailers (for example) to be making more zero rated purchases.
Like I say, the important thing is that the values you submit can be backed up by your records if they do ever query it.
When some of your net sales or purchases are zero rated and some carry vat hmrc will warn you that it doesn’t add up.
Providing your absolutely sure that it’s correct you can ignore it. All hmrc do is check that the net plus vat equals the same as what your submitting.
However usually the notice is prompted when the sales are zero rated.
So firstly check that your vat return in quickfile is correct. If some net purchases are zero rated then purchase vat should only include those that carry vat. Again check the net sales and confirm the sales vat figure is correct.
If both of those are right then you can ignore the message
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