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Flat-rate VAT scheme form: filling in the online return

August 7, 2008 77 Comments

This is a step-by-step guide to filling out the online flat-rate VAT form. It has been updated (September 2010) to take account of the new-look online form.

The flat rate VAT scheme is brilliant. Multiply your VATable income by the flat-rate amount. And that's it. You may even turn a small profit ...

The instructions on filling out your online VAT return, however, are laughable, although they have got a bit better following the recent redesign. Oh my god, they've redesigned it AGAIN and removed the flat rate vat instructions!! Here's the new form:

Flat rate vat online return

Flat rate vat online return

How to fill out your online VAT return if you're in the flat-rate scheme

Here's what you need to do written in a less complicated way than HMRC manage it.

For most people, you still only enter two numbers:

  • In box 1, you enter the amount of VAT you owe. So that's your income, including VAT, mutiplied by your FRVS rate. So if you had income of £12,000 INCLUDING VAT, and your FRVS rate was 10%, you would enter £1,200 here.
  • In box 6, you enter your income INCLUDING VAT. So that's £12,000 in this example. I know it says excluding VAT but this is WRONG. So enter the amount INCLUDING VAT. I'm not kidding - the form is wrong - it's aimed at normal VAT people. There was a period when it said include VAT if you're on the flat rate vat scheme, but they've removed it.

In the other boxes, I enter a zero.

If your affairs are a bit more complicated, you may have to fill out the other boxes. This is explained here. But, essentially:

  • You fill out box 2 only if you bought goods or services from other EU countries.
  • Box 3 is calculated for you.
  • Box 4 is usually 0 as you can't reclaim VAT you've paid under the FRVS. There are exceptions for capital expenditure over £2,000, VAT you've paid at initial registration, and reverse-charge purchases from abroad. For most people, none of this applies.
  • Box 5 is calculated for you.
  • Box 7 is usually 0, unless you've bought goods from another EU country or made a £2,000+ capital purchase.
  • Box 8 and box 9 are applicable only if you've traded with other EU countries.

That's it, though. For most people, fill out box 1 and 6, and remember to enter your income INCLUDING VAT.

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77 Comments »

  • NaomiKeeping says:

    Brilliant!!

    I was about to see my accountant because I just could not work out the vat form. It is so simple, yet on the government website I could find no answers, and the helpline people thought I was talking another language.
    Thanks for the plain english advice!!

  • Eric Ring says:

    Thank you very much, I too could find nothing on HMRC site. Was beginning to tear my hair out sorting which boxes and figures to use. Also HMRC blurb seems to say you use from next quarter but the official advice letter backdated mine to current quarter and it's due in this week. The blurb obviously means from the next actual submitted return.

  • Ron Barrett says:

    Many thanks, I too was struggling to fill in my first return. Simple instruction from HMRC are required. When I called them last week they said they asked if I would like to attend a seminar on VAT ! er no thanks....#

    Thanks for the advice.

  • Douglas says:

    Thanks. This is really useful. It never fails to amaze me that government can be miss the obvious. I could not find any help on the HMRC website either.

  • David Butler says:

    Thanks for this .
    I was going to see my accountant to find out how much he would charge me to fill this form in or if he could do it in with the price he quoted me for end of year .
    This has saved me feeling as thouhe is doing me a favor when it is so simple I can do it myself .

    Thank you for your help

  • Paul says:

    Hi,

    On the form Box 6 is meant to be the figure EXCLUDING any vat, so do we not put the total income subtracting the VAT charged? So in your example, is this not 50K minus any VAT charged or am I wrong?

    • Hi, no, that's the problem. The form is completely wrong if you're on the flat rate vat scheme.

      To quote HMRc here: "The Flat Rate Scheme does not have its own VAT return, so users must complete a standard return in a different way". By different, they mean completely illogical.

      They direct you to here, where they say about box 6: "Enter the turnover to which you applied the flat rate scheme percentage, including VAT."

      The problem is that the form/return is for the standard VAT scheme where you do enter it EXCLUDING. When you're on the flat rate vat scheme, you use the same form, but enter the amount INCLUDING Vat.

      Idiotic, but true ...

  • Jo says:

    Just wanted to add my thanks for this excellent, clear advice. I've been dreading filing my VAT return and the form is complete gobbledegook if you're on the flat rate scheme, but this has made it so simple.

  • Nick T says:

    Can I also add my thanks.

    The amazing thing is that by not bothering to redesign the form (which is inexcusable for those paying online), I would imagine HMRC are actually losing money. For example, I think a common misperception is that on the FRS you repay your percentage, say, 10%, of the vat exclusive figure, thereby proifiting by the current VAT rate MINUS your fixed figure (so 5% in this case), when in fact, it should be the VAT inclusive figure, as you say.

    Here's a good example of someone (supposedly savvy), misunderstanding the scheme:
    http://www.spectator.co.uk/business/coffeehouse/3034801/weasel-no1-turning-the-vat-cut-into-a-tax-rise.thtml

  • Andrew says:

    Hi

    Thanks for this great advice. These is nowhere on HMRC websire that explains this in simple terms.

    Also have you noticed how you NEVER get a receipt for the VAT you pay? I do a direct transfer all the time but NEVER get anything to say the funds have been received. How terrible.

  • Alastair says:

    Blimey!
    How ridiculous can HMRC get? Thank you so much for the great advice. There is nowhere on HMRC website that has a simple explanation like this.What a refreshing change.
    Alastair
    Devon

  • craig says:

    So you only fill in those two sections?

  • michael says:

    when you are claiming back vat on a purchase, what box do you put it in and do you take it of the total payable to vat man
    eg turnover+vat 50,000 box 1
    frv @10% 5,000 box 6
    eg vat paid on new van £1,000, where do you put this figure and do you now pay the vat man £4,000
    cheers

  • Ken says:

    Yes - crazy isn't it! One thing that's worth remembering is the fact that you can reclaim the full VAT paid on items over £2,000 (inc. VAT) even when you are on a flat rate scheme. But where does that go on the form? I have no idea. Perhaps it's box 4 but it's a guessing game with this form.

  • Alastair says:

    HI, I read the stuff on your blog reference filing my vat return and only filling in box 1 & 6 which seems logical but i have had my VAT return returned for errors.Is this because i did not file it onloine????

    Thank you
    Alastair

  • Alastair says:

    Hi, Yes i am definately in it? I will keep you posted?
    Alastair

  • Alastair says:

    Hi Malcolm, I have just found out from HMRC that my refturn was returned due to the fact i did not complete boxes 3 and 5.

    I don't think my case was a one off but they have said to me Box 1,3 and 5 all will have the same figure in, ie the ammount you are going to pay them and obviously box 6 being your total sales.

    I will keep you informed of any developements.

    Regards
    Alastair

    • Ah. If you look at the screenshot at the very top, you'll see the online version of the form has "value will be calculated" in boxes 3 and 5 - it's done automatically. With the paper version, you must need to fill them in yourself. Cheers.

  • Craig H says:

    Many thanks - cracking advice that I have used and passed on to a number of other rather confused users of the FRS. Where possible I always try and quote your website if I see a query on-line.

  • Simon Cook says:

    I just wanted to say thanks for such a clear and final explanation of how to fill out my return. Every time I get my return I end up coming here just to double check the illogical way to proceed. Its unbelievable that HMRC can't get it together to sort a flat rate form.

  • Trevor English says:

    Hi Malcolm,

    I wondered if you could kindly help, I just can't find a satisfactory answer to this anywhere -

    If I have annual income of 10k, only 8k of which was vatable - which gave rise to £ 1,300 in vat received, the calculation of vat due to HM Customs, at my flat rate of 9.5%, would be;

    9.5% x £ 9,300 ie. 883.50

    Therefore I enter £ 883.50 in Box 1 and £9,300 in Box 6,
    however, in which box do I indicate the unvatable 2k (sales to vat exempt EU/Australia)?

    Regards,
    Trevor

    • Trevor: Quick question - shouldn't 8k give rise to £1,200 VAT (8,000 * 15% = £1,200)?

      That aside, my understanding is that you can ignore the VAT-exempt stuff. The FRVS means you don't have to account for everything and so you can ignore the non-relevant stuff when you submit the form. So I'd ignore it for VAT purposes (that's what I did when I had a small amount of income from abroad).

      However, I'm not an overseas VAT treatment expert! Have you tried reading the godawful HMRC guide to VAT and international trade?

  • Trevor English says:

    Hi Malcolm,

    I have attempted to read that guide but am soon scratching my head!

    The £1,300 figure arises from vat charged at a mixture of 17.5% and 15% rates.

    Anyway, many many thanks. So just the £883.50 in Box 1 and £9,300 in Box 6? Is it that simple?!

    Regards,
    Trevor

  • £1,300 - ah, that would make sense.

    I think it is as simple as you say. Until the VAT man comes visiting, they don't really care about the calculation, which is why it seems you don't need to tell them about the non-relevant stuff. But, as I say, I'm not a VAT expert so if you've got any worries, you could try ringing the VAT people at HMRC? If not, just fill it in and submit!

  • Trevor English says:

    Thank you Malcolm, your advice is greatly appreciated!!

  • May says:

    Hi Malcom,

    I've just realised after reading your article that in the box 6 need to include VAT in that box. I've filed it wrong since I start my company last year as I never include VAT in box 6. In this case, what can I do? Do I have to let them know or do I have to fix the return since last year?

    • Not sure, sorry. I'd probably err on the side of telling them (especially if you've paid the right amount). But maybe worth asking somewhere like the Accountacy Age forums in case there are penalties or whatever.

      • May says:

        Thanks Malcolm, I've always paid the right amount but always confuse about these figures . I will seek more advice somewhere but I don't think it's fair if there are any penalties to be paid since the form is not very clear for a start and I don't think that everyone would have time read all their guidelines as it's clearly said to exclude VAT in box 6.

        I just read the info from the link you provided to hmrc regarding box 6, in paragraph 7.7 common errors made on VAT returns .. apparently exclude VAT is one of the common errors so, I'm not alone :)

  • James says:

    Thanks Malcolm,

    Very helpful. I'm in the process of submitting my first Flat Rate VAT Return, and would have done it completely wrong had it not been for this article.

    Cheers.

    James

  • Miko says:

    Thanks sooooo much for this, Malcolm. I do have an accountant who told me that this was the correct way, but it was so long ago I forgot and got confused by the form... until I read your article. Nice to have the reassurance.

    Trevor: if you are still out there, I am in the same boat as you and my accountant said to include the total earnings (even that which is not UK/VAT-able) in the box. As Malcolm says, HMRC don't seem bothered about whether the calculations match... well at least they haven't in the 2+ years I have been trading.

  • Martin says:

    Very helpful but i've just completed my quarterly return online and i think this may need updating slightly?

    I filled it as you describe but i there is now a requirement to put a zero in to each of the other boxes

    Cheers
    Martin

  • Dr Paul says:

    Thanks - I visit this page every three months. Best page on the internet ever. Class.

  • Sean says:

    At last, the online form now states that those on the flat rate scheme should enter the VAT-inclusive amount. Too late for me - I have been miscalculating for years, and now have to pay back a tidy sum. Is it the case that I only need to correct for the last four years? ("You cannot adjust your VAT return, or make an error correction notification, for any errors that arose in accounting periods that are outside the time limits at paragraphs
    4.6.1 and 4.7" - Notice 700/45 How to correct VAT errors). And since the underpayment is less than £10k, all I need to do is make up the shortfall when I do my next VAT return? This is what the VAT hotline told me, but I'd like to have confirmation.

  • Bob Sather says:

    I used to be a self-employed sole trader and VAT-registered (not flat-rate). Then in 2007 I stopped being a sole trader and started a limited company. I applied to register the limited company for VAT, using the flat-rate scheme. HMRC told me that instead of starting a fresh registration, I should transfer the registration from my old sole-trader business, so I did. For the first year of trading (2007-08), I took the 1% discount on the flat VAT rate.

    Now, HMRC are telling me that I owe them £££ because I shouldn't have taken the 1% discount: it is only available to businesses in their first year of VAT registration, which doesn't apply to me, because I transferred the registration from my old business! Is this correct? I feel like I've been misled! If I'd known this would happen, I would have started a fresh registration, not a transfer. What do you think?

  • Chris says:

    Hi Malcolm

    At the risk of sounding a little daft... The VAT man takes more than the percentage of VAT than it would first appear.

    eg if your FRVS is 10%, and VAT is at 15% that would be 2/3s or 66.66% of VAT charged on your invoice but because its calculated from a total INCLUDING VAT its actually a higher percentage.

    IE if your invoice was for £100 the VAT at 15% would be £15 (a total inc VAT of £115)

    If your FRVS is 10% you would hand back £11.50 to that VAT man - that would actually be 11.5% of your invoice (not incl VAT)

    The only reason I highlight any of this is because I've been making it more difficult for myself by calculating my VAT due using the FRVS to calculate the percentage to hand back to the VAT man of the VAT from my invoice.

    So using the above example I would be handing back £10 and keeping the £5 for myself. That means the VAT man would be £1.50 short....

    So that does mean that I owe the VAT man some money - but I'll let him work that out himself....

    That is right..?!?

  • Rachel says:

    Hi Malcolm
    I am using the VAT flat rate scheme paying VAT every three months. Obviously I charge 17.5% VAT to my clients, but when it comes to calculating my annual income for my annual tax return, do I include those VAT charges in my total? If so won't I end up paying a igher amount of income tax which surely cancels out the benefit of being VAT-registered in the first place???
    Confused... Thanks

    • Rachel: You account for both the VAT you pay AND which you receive when calculating your end of year profit. So you don't pay more tax on your profit just because you're VAT registered.

      Outside the flat rate vat scheme, VAT is neutral for taxes on your profits (as you pay the government the difference between the amount you receive and the amount you pay).

      With the FRVS, it's possible to make a profit or loss on VAT depending on your actual VAT figures compared with the assumed flat rate.

      I made a small "vat profit" last year - ie the amount I paid HMRC as flat rate VAT was less than the amount I had received from charging people VAT. I paid corporation tax on this as i recall. But I wasn't worse off (as the "vat profit" minus the tax was still more than not having the vat profit in the first place).

      That's probably an overcomplicated answer ...

  • Elaine says:

    Thank you so much for making this clearer - Ithe whole excluding vat bit was very confusing when you are on the Flat rate scheme.

    I do have a little question - if something is invoiced for and the event held in a certain VAT quarter but the client doesn't pay up until the next quarter do you include it in the period it was paid in or held in (if that makes any sense). I was under the impression you waited until you were paid.

    Many thanks

    • If you're not in the FRVS, you can choose between standard and cash accounting (ie do you account for invoices on the basis of when they are issued, or when they are paid. Details here.

      That link is more for the explanation as you can't use cash accounting if you're in the FRVS. However, the FRVS has its own cash-based turnover method. Hooray! Read sections 8 and 9 here. Some of the subsections of section 9 look a little complicated, mind ...

  • Laurence says:

    Thanks so much for this! So much better than the stodgy HMRC site.
    thanks again

    Laurence

  • Darren says:

    once you have deducted your FRSV and paid the Vat if there is any profit canthis be taken out of the company without paying corporation ta on it.

  • Ray Weatherall says:

    Hi,

    Interesting comment above. I am FR registered to 9% and charge the standard 17.5%. I questioned the difference which I call VAT profit to both my accountant and the tax offfice and they both told me that this additional profit is NOT subject to CT. Who is right and who is wrong and where is the definative document to reflect this. I would be interested to hear your thoughts. Many thanks.

    • Darren / Ray: maybe I should have said I have to pay tax ;) My accountant (I think) just has some sort of income amount (which includes VAT) and a load of outgoings (one of which is FRVS). And then I'm taxed on the difference. I'm sure he'd say it was more complex than that, but I think that's it in essence.

      As to a definitive document ... There's this from a few years ago: http://www.accountingweb.co.uk/item/139507

      That gives the context for reading this which says:

      Computation of trading profits
      ...
      Expenses will probably be shown inclusive of VAT as it is irrecoverable (similar to a business not registered for VAT), and it is likely that turnover will be shown net of the flat rate VAT payment. You may however find that the flat rate VAT payment is shown as a profit and loss expense rather than deducted from total turnover.

      There's also a worked example.

      You should also read this which says:
      It is expected that accounts for businesses who are using the scheme will be prepared using gross receipts, less the flat rate VAT percentage, for turnover and that expenses will include the irrecoverable input VAT.

      For both VAT and income tax purposes, there is a requirement to keep a record of sales and purchases. But, for businesses using the scheme, that record does not have to analyse gross, VAT and net separately. The records need only be complete, orderly and easy to follow.

  • Ray W says:

    Malcolm, many thanks for that. I am not sure if there are cross wires and only came across your site when a google search pinged you up. Would you agree the following:

    Invoices £10000
    VAT@17.5% £ 1750
    Gross £11750
    FR VAT@ 9% £ 1057.50
    Difference £ 692.50

    The difference NOT being subject to CT. Is that as you read and understand it? It is my belief that this can go straight in your pocket and is one of the benefits of a small business being on the flat rate scheme. I called my accountant this afternoon and he confirmed this again to me. Once again thanks for your comments

    • Ray - that's not my understanding, no. Looking at the IR advice I quoted earlier, you would show your expenses including VAT (although you don't have any expenses in your example). And your turnover in your example would be £111,750 minus £1057.50 = 110,692.50. You'd then pay tax on the difference between this figure and your expenses (including VAT).

      Having said that, that's just the IR's recommended treatment. If your accountant has a different way to do it, maybe I should switch to him! And I'm not accountant, so please don't take my word for any of this ... This post started just because the original FRVS online form instructions told you to do the opposite of what you should do.

  • Catherine says:

    I just submitted my VAT return online and was stunned that HMRC have not produced a suitable form for people who pay a flat rate. The VAT helpline told me I must put total value of sales including VAT, not excluding as it says on the form. Why is there not a flat rate form??? You're then told by the software that you may have made an error, and do you really want to submit your return. Time they put their house in order.

  • Nick says:

    Love this page. Have sent it to SO many people who query me about these things.

    But ... I'm not perfect. And on my last VAT return, I've noticed a mistake.

    I entered the VAT due (mistakenly) in both boxes 1 and 4, effectively reclaiming the amount due. Hence my total bill was zero. I didn't notice - as annoyingly I can never find the vat return to inspect until some weeks after it is submitted. So ... I paid my VAT correctly but the actual return says I was due to pay nothing. ARGGh. Are you with me?

    So ... this time round I'm trying to correct it. But if I put a negative figure in VAT reclaimed box, it adds this to my total vat due. Obviously this figure is higher than I should pay for this quarter. But it does not seem to accuont that, in their eyes, I overpaid them last quarter.

    What to do? The phone helpline is useless. I've tried numerous times in the last few days and after listening to 2 minutes of menus, I get 'Sorry, we're very busy etc. Goodbye!'

    Grateful for any help.

  • Tim says:

    Thanks for this - it's a shame the HMRC helpline is so useless and the people on the other end of the phone are just plain rude and aggressive. Paying tax shouldn't be difficult! Thanks

  • GW says:

    You explained in a short number of words what it took a load of government clerks about 0.5 Million words to try and explain - and they still failed that! They should link to your site.

  • Any of you still following the flat-rate VAT form debacle - you'll be unsurprised to know they've redesigned the form and removed the flat-rate vat instructions they added at the last redesign. So now the form is wrong again: http://www.malcolmcoles.co.uk/blog/re-design-form-harder/

  • Greg Perrin says:

    I am very gratefull for the guide on how to fill in the tax form but need a little help getting my numbers straight.

    For example i am going to put into box 6 £12,000 my flat rate ammount is 7.5%, how do i work out how much i pay and fill in box 1?

    It might be a simple question but im a builder and just cant figure it out.

    Cheers

  • Mark says:

    hi

    i use the flat rate rate and have been working this out at 9.5% for the last few years. i have just found out that the rate was reduced from dec 08 to jan 10 to 8.5%

    therefore i have overpaid vat for this period, can i claim this back and how do i do this on the vat form online

    any help appreciated

    mark

  • John Lee says:

    Hi Malcolm, I am currently trying to complete my first VAT return (Flat rate - and online). I am a bit confused about how to deal with purchases from the EC. Basically I made a small purcahse (a web domain - for £10.99) from Luxembourg. Now..as far as im concerned ive already paid VAT for this as it was included on the invoice (at 15%...im presuming that is luxembourg's vat rate). Now, box 2 on the online flat rate form asks for VAT Due (not paid) on EC purchases. My guess would be this is VAT due to the UK gvmt..so this would be 17.5%..so that would be £1.92. Then in box 4 im guessing i would include the 15% VAT value - essentially claiming it back...so i would include £1.65. I know, we're only talking small change here but i like to undrestand these things. Many thanks, John

  • Richard says:

    Many thanks for this. It would appear I have been filling in the form correctly but based on the incorrect 'excluding vat' comment for flat rate payers started to panic and could well have wasted time and money trying to rectify a problem that didn't exist had I not read your article.

  • Pete Readman says:

    Thanks for this - I use it every quarter!

  • Shirley Quarmby says:

    Hi. Thanks for this info. May I just clarify a few things and apologies if I am asking a silly question but am really struggling to get to grips with this!?
    For Box 1, when you say "you enter the amount of VAT you owe. That's your income, including VAT ..." is that basically the Gross amount on my sales invoice and VAT at 20%?
    For Box 6, when you say "enter your income INCLUDING VAT", again is that Gross amount on my sales invoice and VAT at 20%?

    Many thanks.

  • Sue Copeland says:

    I am getting two lots of conflicting opinions. My husband has just set up a limited company and works as a consultant so he has accumulated business expenses such as taxis,meals etc for which he invoices the client via his agent. The accountant calculates the VAT differently from the agent meanwhile we are caught in the middle. How is VAT meant to be calculated on the expenses? The agent's remittance seems to charges VAT on the expenses at 20% but we are on a flat rate scheme. On his fees my husband charges 20% is this correct too.?

  • Sue Copeland says:

    Apparently not a disbursement. Here is what happened on the expenses :

    One view was:
    Gross total including VAT=£300
    Subtract VAT (including zero rated VAT which suddenly attracted 20% VAT)=£30
    Nett total=£170

    The other view was
    "Gross" total including VAT=£300
    Add VAT on to the whole total (including items that didnt charge VAT and the zero rated VAT) @ 20%= £60
    New gross total becomes= £360
    And the former gross total becomes the nett total =£300
    We are on flat rate scheme

    !!

  • Darren Racher says:

    Hi,
    Sorry I can see lots of people still having problems and im one of them?

    Box 6 I have entered the full amount including the 20%. Say £20,000
    So for Box 1 I entered 12% of £20,000 = £2400.

    But the boxed show an error message:
    ERROR: This is a mandatory field. Please enter a valid value.

    What am I doing wrong?

  • Thanks Malcolm

    I have been struggling with this for ages. HMRCs website says include VAT in your flat rate calculation, but the form says exclude VAT. It couldn't be more confusing.

    Thanks for clearing it up.

  • colin beckman says:

    In order to make 25% profit on an item with a cost of £8.90 what would the nett selling price to the customer be and what would the gross selling price be including VAT at the current rate?

  • Rob says:

    Hi Malcolm, this is very useful.

    My business partner recently left the company and I'm trying to get my head around the financial side of things.

    We are on a flat rate scheme, for a category that is 13%.

    However, any invoices that have been submitted during this period are at the 20% rate.

    Just so I clear would you mind listing what should be in each box from a total sales figure of £10911.60 (this is inclusive of VAT at 20%) for three month period.

    Your helpful would be grateful received.

    Cheers

    Rob

  • Matt says:

    Hi

    Another confused person here.....

    So what's the deal with zero rated items... e.g. kids stuff and items sold outside the EU to places like american. Do I have to pay the full 20% on them as well??? How does that work?? Either they are 0 rated items or they arent? Talk about confusing.

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