A client of mine on the Flat Rate VAT scheme uses FreeAgent. They have raised a credit note against one of their invoices. Ordinarily I would expect this to simply reduce the flat rate turnover and VAT payable.
Freeagent for some reason is showing the full amount of the VAT (i.e.: not applied the FRS percentage) as amounts reclaimable in box 4. Obviously this is incorrect as this box should be nil.
Does anyone know how to resolve this?
Thanks in advance
Replies (3)
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Write offs go to box 4
Hello,
I'm FreeAgent's Chief Accountant - may I help.
If you create a credit note in FreeAgent it will reduce the amount in box 1 (one of my colleagues has just tested this).
Rather than creating a credit note, could I please ask if you have used the "Write-off Unpaid" option to write off an invoice, please? In that case, as per HMRC's Notice on the flat rate scheme, it is actually correct for the bad debt relief claim to go into box 4 - see paragraph 7.5 of http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...
I hope that helps, but please ask if you're still not sure.
Kind regards,
Emily