Please can someone help. I went to submit my vat return for March to May and noticed anomalies in boxes 1,3,4,5 and 7!
The first issue relates to the vat due - the difference is only £50.79 but at the end of the day it isn’t right. I have looked into the detailed calc and it appears I received payment for two invoices and the amount of VAT recorded by QF is different to the VAT on both of the invoices amounting to £50.64 so close enough I would say.
Issue 2 is for a mobile phone bill entry that QF has split up the VAT and it is showing in box 4 and non-vat amount in box 7. No idea why this is either. I have asked my Accountant for help but he says it will take too long and be too expensive for me to get him involved! So he suggested I enter a manual cash payment to sundry to straighten things up. So I thought I would try here. Any advice to rectify this issue so I submit a VAT return that is correct would be much appreciated.
We’ll certainly try to help you. Although we can only offer guidance on QuickFile itself, there are accountants on the forum who may be able to help with that side of things.
First of all, are you on cash or accrual accounting for VAT?
Is it a case of the detailed calculations not matching what you’re seeing on the report itself? As you’re on cash accounting, it’s always worth bearing in mind that it’s the payments that are taken into account rather than the invoices. If you had, for example, £500 worth of VAT on sales invoices issued in a VAT period, but your clients paid all that on time, plus an additional £100 (which could be from a previous period, or an advanced payment on their account), the report would count £600, because that’s the cash you’ve taken.
The invoice for the mobile phone bill, am I right in thinking there are 2 elements to it - part of which is 20% and part is zero-rated?
The detailed calcs do match the amounts that have transferred over to the automated VAT return. The anomoly is that the amounts I invoiced for are the exact amounts I received in that quarter. The VAT amounts in the VAT return are higher than the VAT amounts I invoiced and was paid. BUT I think I have got to the bottom of it - On both these invoices I have a number of lines that are zero-VAT to the client such as mileage and parking, as I didn’t pay VAT so I don’t charge my client VAT. Quick File has charged VAT on these items which is where the figures come from. So basically I haven’t charged my clients the VAT but QF wants me to pay VAT to the HMRC, hence I’ll be out of pocket by about £50. I have done this before and never have I had this issue. So, Is this my error or a system error? How can I rectify?
In response to your comment about issue 2:
No, my mobile phone bill was £37.90. Just a normal expense along with many others. My VAT return has singled it out and box 4 states - £6.32 (which is the VAT figure) and Box 7 - £31.58 (which is the NET figure). Now I have just been back through my old mobile phone expense records and noticed that normally I have just recorded the net amount but for some reason on this one it includes the VAT on it. As I am on the flat rate scheme I don’t reclaim VAT but this error perhaps looks like I want to reclaim the VAT, which I don’t. (EDIT: I HAVE RECTIFIED THIS ONE SO IT IS NOW UPDATED CORRECTLY ON MY VAT RETURN)
This is exactly how the flat rate scheme is supposed to work. Whatever VAT you charge to your clients, the amount you owe HMRC is your flat rate percentage multiplied by the total VAT inclusive sales for the quarter. The flat rate for each business sector takes account of the normal standard/zero rate split for that type of business but if you’re making more zero rated sales than would be normal for your business sector then you will end up out of pocket.
However you probably should be charging your clients VAT on your expenses even if they were zero rated to you, unless they meet the very specific criteria to be treated as “disbursements” (which things like your own travel costs wouldn’t). This is an area where you should probably get professional advice if you haven’t already.
Thanks for taking the time to reply Ian. Completely understand the flat rate system but your point about always charging VAT to clients even if I haven’t been charged it is a great point and one I didn’t realise so thank you for pointing that out. Thank you. Natalie
Can I just confirm which comment you’re looking for clarification on? The post for 4th June relates to VAT being charged to clients, so just want to be sure I’m reading the correct post.
Hi Mathew - yes - I have copied it here so you can see my questions below…
The detailed calcs do match the amounts that have transferred over to the automated VAT return. The anomoly is that the amounts I invoiced for are the exact amounts I received in that quarter. The VAT amounts in the VAT return are higher than the VAT amounts I invoiced and was paid. BUT I think I have got to the bottom of it - On both these invoices I have a number of lines that are zero-VAT to the client such as mileage and parking, as I didn’t pay VAT so I don’t charge my client VAT. Quick File has charged VAT on these items which is where the figures come from. So basically I haven’t charged my clients the VAT but QF wants me to pay VAT to the HMRC, hence I’ll be out of pocket by about £50. I have done this before and never have I had this issue. So, Is this my error or a system error? How can I rectify on QF so it is accurate?
I think this would come down to your own decision and whether you want to invoice your clients for the VAT that you should have charged. Ultimately, you’re paying VAT on the invoice anyway as you’re on the flat rate scheme, it’s just that you haven’t charged it to your client.
For example, let’s say you invoiced your client for £50.00 with 0% VAT, and you’re on a 15% Flat Rate Scheme. You would be paying £7.50 of VAT to HMRC, regardless of whether or not you charged it.
You could issue a VAT only invoice to your clients for the difference (using my example, you could charge them a £10 VAT only invoice), but the decision would be yours in this case.
That said, I’m not an accountant, so it may be worth double checking with yours to ensure that you would need to do this.
That’s what I meant when I said that it’s how the Flat Rate Scheme is supposed to work. FRS calculates the VAT due to HMRC as a percentage of the VAT-inclusive sales total, so you pay the same amount over to HMRC on any invoice with a grand total of (say) £12 regardless of whether that’s £10+20% VAT or £12 net for something zero rated.
Ok thanks @ian_roberts. I realise that. What I was just trying to establish is whether I can do anything to rectify now for this VAT period but from what you @QFMathew say there isn’t - well, apart form issuing my client a VAT only invoice which I wont do as it is my error. I thank you both for all your help. I have learned from my mistake and from now on will charge VAT to my client regardless so that I don’t have this issue again. Many thanks. Natalie
Unfortunately, you can’t use cash accounting for VAT if you are on the Flat Rate Scheme.
VAT inclusive turnover includes standard, zero rated and reduced supplies, so you will be paying VAT on these with the Flat Rate Scheme.
You may also want to take a look at your business turnover, and work out if this scheme is beneficial to you, as you could actually be worse off, as you cant claim back VAT on expenses, unless you have made a single purchase of a capital expenditure goods, costing more then £2,000 (VAT included)
Also, for example, even something like postage with Royal Mail, which don’t charge VAT, if you were to pass on postage costs to your client, then you would charge VAT on such.
Even if they’re not VAT registered or you don’t want to send additional requests for money you should at least credit the original invoice(s) where you’ve done this and send an invoice for the same gross but with a standard 20% VAT rather than the standard/zero rated mix. Clients who are VAT registered are unable to claim VAT on purchases from you when they should be able to.
Can I just ask why you only record the net amount? Do you do this for all your expenses? You may not be allowed to reclaim input VAT but it is still an allowable expense of the business.
And if you’re on the flat rate cash scheme, the output VAT will be your flat rate % multiplied by the amount of cash received, rather than multiplied by your sales for the period, hence it will include VAT on everything at that percentage.
Assuming your supply of seervices is standard rated, then you should be charging VAT on everything you invoice to your clients - unless, as @ian_roberts said it’s a disbursement (these are very specific items paid for on behalf of the client, not just costs you have incurred and recharged). So the invoices you have issued to your client with zero VAT on them are, in fact, wrong. If you don’t want to charge them the VAT, you can raise an “internal” credit note (i.e. one which you don’t send to the client) and re-invoice for the same amount but include VAT. This will make your accounts correct, and will not affect your VAT as this is calculated based on a % of cash paid.
