Flat-rate VAT scheme form: filling in the online return 58
This is a step-by-step guide to filling out the online flat-rate VAT form. It has been updated 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.
How to fill out your online VAT return if you're in the flat-rate scheme
Flat rate vat scheme online form - the new look
In the old days, the instructions were wrong. Now they are at least right. But 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. With the old form, it told you to enter the amount excluding VAT. That was wrong, and they've now corrected it. So enter the amount INCLUDING VAT.
In the other boxes, 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.
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!!
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.
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.
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.
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
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 ...
Thanks very much Malcolm, this has now cleared it all up!
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.
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
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.
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
So you only fill in those two sections?
Yup!
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
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.
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
These instructions are about the flat-rate vat scheme only. Are you definitely in it? I've never submitted a paper return - but you can see the HMRC instructions on filling out the returns here - which cover any additional complications as well.
Hi, Yes i am definately in it? I will keep you posted?
Alastair
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.
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.
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.
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?
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!
Thank you Malcolm, your advice is greatly appreciated!!
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.
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
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
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.
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
Yes, you leave them as 0 - you shouldn't have to enter 0 as the online form comes pre-filled with "0.00". Just don't delete them!
The online form has changed, so your screen shot of the old form is no longer applicable. The boxes on the new form are no longer pre filled with 0.00, so you have to actively enter 0.00 in all the other boxes or you get a form error
I've updated this now with the new form and new instructions.
Thanks - I visit this page every three months. Best page on the internet ever. Class.
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.
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?
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..?!?
Your figures are right. So yes, it sounds like you owe him money, I'm afraid.
I think you should probably pay him ... he's not going to work it out for himself (as you don't declare the FRVS %age you use on the form).
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 ...
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 ...
Thanks so much for this! So much better than the stodgy HMRC site.
thanks again
Laurence
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.
Darren: No, you have to pay tax ...
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.
Actually, those two descriptions of what to do sound slightly different to how I described my accountant doing it. Anyway, I hope that all helps ...
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.
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.
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.
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
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.