Completing your VAT return can be confusing and troublesome. When completing your standard VAT return, remember:
1) Boxes 1 to 5 are tax boxes;
2) Box 2 is for intra-EC acquisition tax only;
3) Boxes 6 to 9 are net of tax and rounded to whole numbers;
4) Box 6 includes the net value of outputs, including taxable, exempt and outside the scope;
5) Box 7 includes the net value of inputs, including taxable, exempt and outside the scope;
6) Boxes 8 and 9 only include intra-EC removals or acquisitions of goods;
7) The values in Boxes 8 and 9 should also be included in Boxes 6 and 7;
8) An EC Sales List will be sent automatically if there is a value in Box 8;
9) But it is also required if services are supplied intra-EC;
10) The reverse charge on international services received is included in Boxes 1, 4 (subject to partial exemption etc), 6 and 7;
11) But a domestic reverse charge on purchases is only included in Boxes 1, 4 (subject to partial exemption etc) and 7;
12) Intra-EC acquisitions are included in Boxes 2, 4 (subject to partial exemption etc) and 7.
Flat Rate VAT:
We all know about the limited cost business test introduced on 1st April 2017 which means that for many businesses the FRS is no longer viable, but what else should we watch out for with the scheme?
1) The £150k turnover threshold to join is VAT exclusive and taxable only but the £230k turnover threshold to leave is gross and includes exempt supplies;
2) Output tax is due on reduced-rate, zero-rated and exempt supplies under the scheme;
3) Output tax is due on zero-rated exports or EC removals;
4) The Box 6 scheme turnover is gross rather than net;
5) Limited cost businesses have to use 16.5% (tested on a period by period basis);
6) The reverse charge on services is dealt with completely outside the scheme;
7) If goods are brought in from the EU acquisition tax is due in Box 2 but there is no input tax claim in Box 4;
8) International services outside the scope of UK VAT are dealt with completely outside the scheme;
9) HMRC now allow retrospective adjustments to the FRS sector percentage;
10) Certain businesses historically using 14.5% can make refund claims based on 12% if they have used the wrong percentage.
Retrospective claims are now possible where the wrong sector percentage has been used e.g. engineers other than civil engineers on 14.5%. If you have clients in this situation please get in touch.
One of the main risks in FRS is treating everything as part of the scheme when, in fact, there are often transactions which have to be accounted for under the normal rules. Our accountants can help with that, providing a comprehensive VAT management template including the Flat Rate Scheme. For further assistance with your VAT matters, contact Ascentant in Derby or London.