VAT FLAT RATE SCHEME

Hi Everyone

I like to find out whether VT Transaction + has facility to accommodate VAT flat rate scheme.

I know there are options for standard rate and for other rates, but I could not work out how to use for flat rate scheme.

I would like to thank everyone in advance for their time and contribution.

Comments
jasonholden's picture

No

jasonholden | | Permalink

It doesn't cope with Flat Rate as such.

Per VT guidance:

6.16 Flat rate scheme
Introduction
Under the flat rate scheme, the VAT due to HMRC is based on a percentage of your
turnover and you do not have to keep records of the VAT on each individual sale and
purchase. However, if you use a proper bookkeeping package such as VT Transaction+,
the flat rate scheme probably makes things more difficult rather than easier.
Depending on your business, you may pay less (or more) VAT under the flat rate scheme
than you would under the normal accounting rules.
VT Transaction+ has no special support for the flat rate scheme and does not produce
the return automatically. However, you can use VT Transaction+ to determine your VAT
inclusive turnover for the VAT period. You can then manually apply your flat rate
percentage to that turnover to determine the amount of VAT due.
Accounting methods
There are three ways of doing your accounting when you operate the flat rate scheme:
· Enter all your sales and purchases gross of VAT (ie do not enter any VAT
amounts). This is the simplest and the quickest method; or
· Enter all your transactions as if you are accounting for VAT normally. You can
then compare the liability under the flat rate scheme with normal VAT accounting
to check that the flat rate scheme is advantageous to you; or
· Enter just your sales as if you were accounting for VAT normally
You must account for the VAT on your sales normally if:
Value Added Tax 50
· You use VT Transaction+ to issue sales invoices; or
· You use the cash based turnover method under the flat rate scheme and you
enter invoices into VT Transaction+ before you receive the money (ie you
maintain a customers ledger showing the amounts that your customers owe you);
or
· You make sales of goods to the EC (the VT Transaction+ VAT return can then be
used to complete box 9 of the flat rate return). Alternatively, you could keep a
manual record of these items

thacca's picture

No.... But

thacca | | Permalink
  • I post sales as normal;
  • record purchases with no VAT (unless capital expenditure qualifying for VAT to be reclaimed);
  • Run a VAT return at the end of the quarter. Apply Flat rate pecentage to Gross Sales.
  • Make a journal adjustment for difference between VAT shown as due and that calculated as follows.
  • DR Output VAT
  • CR Sales

Once you've done it once you can even copy the journal the following quarter so you don't even have to think about which around the debits and credits go.

That is my preferred method but you could also record sales gross and make the journal the other way around. You could also calculate what the VAT rate is to equate to the same flat rate percentage. i.e a flat rate of 10% would equate to a VAT rate of 11.11%. These two methods would be suitable where VT is used to record invoices rather than produce them.

 

I've just knocked up the following in Excel. I think it's right but please check before using.

 

Flat rate Equiv VAT Rate
9.5 10.50%
10 11.11%
10.5 11.73%
11 12.36%
11.5 12.99%
12 13.64%
12.5 14.29%
13 14.94%
13.5 15.61%
14 16.28%
14.5 16.96%
15 17.65%
15.5 18.34%
16 19.05%

 

 

 

 

 

miketombs's picture

I use a calculated VAT rate

miketombs | | Permalink

I use a calculated VAT rate to get the right bottom line answer, but it's probably more sensible to do as suggested above and use normal output VAT and just journalise the differences every month or quarter. The 'calculated rate' method is best though when rates change, either because of budgets or because of the year one discounted rate. The drawback is that it then can't be used to produce proper VAT invoices.

Kashflow copes with the flat rate scheme properly. I don't know off hand of any others that do, but I've not particularly looked.

Kent accountant's picture

Xero does too

Kent accountant | | Permalink

Thought I'd restart this thread.

Xero lets you switch between accruals,cash and FRS to see the difference in each. At the foot of the VAT report when using FRS it also tells you how much you have 'saved' by being on FRS. 

 

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