I’ve just run a VAT return where FRS applies on a cash accounting basis. The system is calculating FRS VAT on disbursements even though there is no VAT on the invoice and FRS VAT is not applicable. How do I exclude the disbursements from sales on which FRS VAT is calculated?
The solution is probably to mark the invoice as Out of Scope (checking this). Is this a disbursement only invoice, i.e. no Vatable amounts, or is it mixed?
The other option (if it’s just the odd invoice) is to adjust out the VAT on the return.
Hi Glenn
It’s a disbursement only invoice - the solution is probably to have a nominal account that isn’t picked up as part of the FRS calculation or a tick box to say exclude from FRS. As it happens I’ve rechecked the sales invoice and see that the client did charge VAT on the disbursements so FRS VAT is due and the system has calculated correctly, but maybe it is an issue if there is no VAT on the disbursements? Not sure, I haven’t tried it out.
I think the “Out of Scope” method will work fine if you encounter this in the future, we’d rather just keep one simple method of exclusion rather than creating different methods for different scenarios, VAT is a very complex area and there are many rules around VAT for including/excluding specific items.
Thanks Glenn
Just ran the VAT with VAT code = no VAT, but the invoice e.g. invoice 16 appears in the FRS calculations and FRS at 13% is calculated on it. There isn’t an ‘Out of Scope’ option on the VAT code list.
I can manually adjust the VAT return, but it’s not ideal and the client wouldn’t know or realise what to do. Better to have an ‘exclude from FRS’ option. Do the adjustments to the VAT return appear in the nominal accounts?
It’s not on the drop down menu, you will first need to mark the client record as “Exempt or Out of Scope for VAT purposes” for the options to appear as per the instructions here. After that two options will appear at the foot of all their invoices you can apply to exclude those invoices from the VAT return.
Yes they do.
Thanks Glenn, it doesn’t seem the out of scope can be applied to past invoices, so I suppose these will need to be adjusted.
A bit of a strange way to deal with out of scope and exempt - it would be the supply that is exempt/out of scope not the customer/supplier/invoice, so if the invoice is for mixed supplies (which it often would be e.g. legal fees plus disbursements) Quickfile can’t cope, a separate invoice is needed for each type of supply. It would be better just to have out of scope and exempt as VAT codes and for FRS calculations to exclude the out of scope code.
You can definitely apply this retrospectively to invoices, let me send you a PM to get more info.
I don’t disagree, although knowing how the software evolved, I can tell you somethings are extremely difficult and risky to implement at this stage. This being one of those things. Anything VAT related (particularly with cash based accounting) is very complex behind the scenes.
Yes, VAT must be a developer’s nightmare!
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