VT Transaction+

Please note the information in this article is for guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. If in doubt, refer to an accountant or HMRC VAT Notice 733.

Introduction

Under the flat rate scheme, output VAT due to HMRC is based on a flat percentage of your VAT inclusive turnover. Input VAT cannot usually be reclaimed.

Flat rate workaround

VT Transaction+ has no special support for the flat rate scheme and it does not generate a flat rate VAT return directly.

As a workaround you can enter transactions as described below and run a dummy VAT return in VT Transaction+, which will provide figures to calculate the flat rate VAT. You can then import the dummy VAT return to an Excel spreadsheet, perform the calculations stated below, and use the calculated figures to create a flat rate VAT return in the same spreadsheet. The flat rate VAT return can be submitted from spreadsheet to HMRC using the VT MTD for Excel Add-in.

The overall process complies with digital links requirements if the steps are followed as described below. For more details, see Digital Links below.

Do not use this workaround if any of the Exclusions from the flat rate scheme below apply to you.

1.Entering sales

•Under the flat rate scheme, sales should be made to customers at the normal rates of VAT (usually the standard rate), not the flat rate.

•Therefore, enter sales in the usual way (i.e. enter the net amount of the sale, and enter output VAT at the normal rates, in the SIN, SIN or REC dialogs).

2.Entering purchases

•Input VAT cannot be reclaimed on purchases under the flat rate scheme

•Therefore, enter purchases gross of VAT (using the PIN, PAY or CHQ or buttons) and do not enter any VAT in the Input VAT field. This will ensure that amounts do not get recorded in the Creditors: Input VAT account.

3.Calculation of VAT inclusive turnover and flat rate VAT due

The flat rate VAT due to HMRC is calculated by multiplying the flat rate % by the VAT inclusive turnover (i.e. the value of sales including VAT you have billed to customers).

•To determine VAT inclusive turnover:

oGenerate and save a dummy VAT return in VT Transaction+ for the VAT period (press the F11 key on your keyboard then select New VAT Return), which should show the following (assuming no other sales than the invoice in step 1. for the purpose of example):

oImport the dummy VAT return to Excel by opening Excel, creating a new spreadsheet, then selecting Addins>VT MTD>Import VAT return totals from VT Transaction+/VT Cash Book file:

oIn the Import VAT Return Total dialog that appears, select the VT Transaction+ file from the list and click OK. If it not listed, click on the Browse button at the bottom the dialog to locate the file on your PC:

oIn the next dialog, make sure the current VAT return is showing, tick the Include box name.. and Include box number... options then click OK:

oThe dummy VAT return data then appears as follows:

oOn the same spreadsheet, insert a formula to calculate VAT inclusive turnover, by adding the values in boxes 1 and 6 of the dummy return data:

oThe resulting figure should equal your VAT inclusive sales turnover (provided you have not made supplies excluded from the flat rate scheme). In this example it is £33.33 + £6.67 = £40.00:

•To determine flat rate VAT due:

oOn the same spreadsheet, insert a formula to multiply the cell containing the VAT inclusive turnover, by the your flat rate % (You can find out what rate to use at https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay. In the screenshot below, 13.5% is used as an example):

4.Creating the flat rate return on a spreadsheet

On the same spreadsheet, manually enter a flat rate VAT return laid out as shown in the screenshot below:

•Output VAT: Box 1 should be the flat rate VAT due and should be linked using an Excel formula, to the cell where this figure was calculated:

•Total output VAT: Box 3 should be the total of boxes 1 and 2 so enter a formula to calculate this figure:

•Input VAT: Box 4 should normally be zero, provided you have not made purchases excluded from the flat rate scheme. If you have only made purchases covered by the flat rate scheme, you can enter zero in this box.

•Net VAT due: Box 5 should be Output VAT less Input VAT, so enter a formula to calculate this figure:

•Total sales: Box 6 should be the VAT inclusive turnover and should be linked using an Excel formula, to the cell where this figure was calculated

•Total purchases: Box 7 should normally be zero, provided you have not made purchases excluded from the flat rate scheme. If you have only made purchases covered by the flat rate scheme, you can enter zero in this box.

•Boxes 2, 8, and 9 are for intra-EU transactions and so are not applicable for businesses in Great Britain (If you are Northern Ireland business and trade with the EU, these boxes may be applicable) calculated

5.Submitting the flat rate return from the spreadsheet

Follow the steps at Using MTD for Excel: VAT return in any format

6.VAT journal

You also need to enter a journal in VT Transaction+ to account for the difference between the actual output VAT due under the flat rate scheme and the figure currently shown in the Net VAT due account.

For this you will need to create a Flat rate VAT account in the income ledger and enter a journal for the difference using the JRN transaction as follows:

•If the amount in Net VAT due is more than the actual flat rate VAT due:

•If the amount in Net VAT due is less than the actual flat rate VAT due:

Digital links

The overall process above is summarised as follows, which demonstrates how digital links are in place at each step from the starting point of transaction entries to submission of the VAT return.

1.Enter transactions in VT Transaction+

2.Run a dummy VAT return in VT Transaction+ (this is digitally linked to step 1 as it is run in the same program)

3.Import totals of the dummy return from VT Transaction+ to an Excel spreadsheet (this is digitally linked to step 2 by way of importing)

4.On the same spreadsheet, calculate the VAT inclusive turnover from the dummy return totals (box 1 plus box 6) and VAT due (this is digitally linked to step 3 if the calculated cells are linked to the dummy return total cells using Excel formulas)

5.On the same spreadsheet, create a flat rate return (this is digitally linked to step 3 if the cells for the boxes on the flat rate return are linked to the calculated cells using Excel formulas)

6.Submit the return from the spreadsheet to HMRC (this is digitally linked to step 5 through an interface between VT and HMRC's systems)

Make sure you do not copy and paste any data in the spreadsheet as this does not comply with HMRC digital links rules.

Exclusions from the flat rate scheme

In HMRC VAT Notice 733, it is stated that:

'You cannot use the Flat Rate scheme with the following schemes:

•Cash Accounting Scheme

•Retail Schemes

•Margin Scheme for second-hand goods

•Domestic reverse charge'

HMRC VAT Notice 733 also states that:

•'purchases (of) services from outside the UK to which the reverse charge applies supplies......should be dealt with outside of the Flat Rate Scheme'