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Accounting for VAT flat rate scheme

Accounting for VAT flat rate scheme

What is the book-keeping double entry for the VAT flat rate scheme? The normal 17.5% VAT on sales goes to the sales control account. Then when the VAT is paid there is a difference on this control account that should go to the P&L account? Does this go to sales or to a seperate account? Is it disallowable for tax purposes?
Thanks Karen
Karen Crawford


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07th Apr 2006 12:16

Post everything gross
The answer is to post everything gross of VAT.
Invoice client; Dr Client £1,175; Cr Sales £1,175. Similarly all expenses are debited gross of VAT. The VAT paid is then treated as a deduction from sales (or can be treated as an expense).

If I recall, there is a HMCR note on the subject.

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07th Apr 2006 14:58
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07th Apr 2006 16:30

Simple guide to the bookkeeping
Although the business still has to invoice the customers the normal 17.5%, the internal bookkeeping would follow a different path. To keep it simple the double entry would be as follows:

1) Record the sale
DR Sales Ledger (Gross Amount)
CR Sales (Gross Amount)

So the sale is initially recorded as gross

2) VAT calculation
DR Sales (the percentage applied to the gross sales)
CR VAT payable.

So you deduct from sales the VAT payable to reduce the sales figure to it's new net amount.

For expenses (apart from large fixed assets), the bookkeeping would be as if you weren't VAT registered.

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11th Apr 2006 17:18

.....if you wish to keep track of whether you are making a profit or loss by using the FRS against the standard scheme each reporting period (no bad thing if you think it is worth the extra effort), you
(i) bookkeep "as normal" - ie with vat on sales and expenses per standard scheme posted to a vat account,
(ii) do the quarterly (or whatever) calculation of vat payable under FRS, pay this over and post to vat account
(iii) take the quarterly (or whatever)difference on the vat account to P & L account.

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