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Community Explorer **

Flat Rate VAT in UK failure

Having purchased Quick Books for MTD being told it was suitable for Flat Rate VAT I am very dissapointed to discover it appears not to be.
1. P&L - With my existing accounts I deduct my 11% FRS rate from sales.
However QB removes the full 20%
My purchases are all recorded including VAT as I can not recover the VAT, however QB removes the VAT.
2. BALANCE SHEET - My VAT liability is shown as if I was on standard scheme not FRS. My profit is therefore also inaccurate. 
Whilst I have not gone this deep I assume my Capital Expenditure will also remove the VAT giving me inaccurate values for my Capital Expenditure, and thus my write down figures will be inaccurate accordingly. (Accepting I can reclaim over £2k)
3. VAT RETURN - I appreciate the software gives me an accurate VAT return, but having not done one yet I do not know how it accounts for the difference. Am I to add the difference to Profit from FRS under Other Income? If so this is adding to my sales income based on my purchases.
Also there appears to be no ongoing way to make this adjustment on the P&L, should I do this manually or will it happen when I actually complete a return.

The resulting effect currently is that my sales figures are distorted.
My purchase figures are also distorted with those companies charging VAT appearing 20% cheaper than those that don't.
In essence the P&L and Balance sheet are useless, and all that data entry gives no more benefit than calculating 11% of my sales figures for HMRC which any of my children could do in a moment.

Please advise how to circumvent these issues as my communication with QB so far has been very unhelpful and simply informed me to take advice from my accountant as opposed to realising that in the last 17 years of the FRS their appears to be no real adequate solution to what should be a very simple problem to resolve.

Any assistance would be appreciated. And I am hoping I am wrong and simply had a QB advisor who was not up to speed.

39 REPLIES 39
QuickBooks Team

Re: Flat Rate VAT in UK failure

Hi Kevin

 

Thank you for contacting the Community.

 

Before we go into this issue in more detail I just need to check which product you have is it Quickbooks Online or Quickboooks Desktop?

 

Kind regards

 

Emma

Community Contributor *

Re: Flat Rate VAT in UK failure

I have these exact same concerns; QuickBooks Online. Would love to hear official response.

QuickBooks Team

Re: Flat Rate VAT in UK failure

I’m glad to see you in the Community @KevinWhibley, and @TopCat123


Thanks for providing additional information for it gives me a quick overview of how the taxes are showing in your reports.  Let me provide some additional information about the Flat Rate Scheme rate.


The financial reports will always show the 20% calculation which is the standard rate. Once you submit the actual return, QBO will automatically use the flat rate.

 

In the chart of accounts, the Savings by FRS amount will only show after the VAT return is marked as filed. For purchases that are more than the threshold, you can just select the VAT reclaimable on the expense/bill when you create the transaction.


Here’s how:

 

  1. Open the bill/expense.
  2. Go to the Amounts are section, then click on the drop-down and select the correct tax code.
  3. Mark the box for VAT Reclaimable.
  4. Click on Save.


To give more insights on how the Flat Rate Scheme is calculated, feel free to read this article: UK Flat Rate Scheme.


We appreciate your input on how you want the report to show the Flat rate Scheme calculation. If this is something you'd like to have in the product, I'd suggest sending feedback to our Development Team.


Ideas like this are helpful in identifying the features our customers want the most for consideration in future enhancements. To do so, go to the Gear icon at the top and select Feedback.

 

While you do that, I'll personally let them know that adding this information is important for your business.

 

Thanks for sending your thoughts and ideas. Your voice plays a vital role in determining how to best improve QuickBooks.

 

Reach out to me directly if you have any other concerns. I'm always around to help. Have a good one.

 

 

 

Community Explorer **

Re: Flat Rate VAT in UK failure

Many thanks for taking the time to give a clear reply.

It does however remain a frustration that 
a) The difference between Standard Rate VAT and Flat Rate VAT only shows as an element once the return is completed.  I do not understand why this can not show as an ongoing calculation.

b) Whilst I now accept that the revenue actually want these figures in this way, even though it distorts the actual trading position of the company, it would be beneficial to offer a reporting structure that gives expenses and income in real terms from a management accounting perspective. In this way we can see how much we are really spending and receiving instead of just having a balancing figure of no discernible significance on the P&L.

c) It is a shame that the call centre staff I spoke too were not as eloquent as yourself in what I suspect is quite a common issue.

I would like to feed these points back to development, and wonder if you can do this on my behalf as I feel you have a handle on what I have been trying to say.

Kevin

Community Contributor *

Re: Flat Rate VAT in UK failure

I’ve noticed the functionality to report the ‘correct’ figures immediately in reports for FRS businesses is proved by FreeAgent, albeit this solution has a higher cost.

QuickBooks Team

Re: Flat Rate VAT in UK failure

Hey,

 

Thanks for your positive feedback about @Rasa-LilaM

 

I will share this feedback to my Community site coordinator, and ask for it to be fed back to the developers.

I'd also like to mimic my colleague in asking for your feedback to be shared directly with our development team, you can go to the Gear - Feedback within , or you can use this link: https://feedback.qbo.intuit.com/

 

I work out of our call center site, and i'd like to follow up on the service you received when calling us - could you please PM me your Email Address or Company ID number?

 

Thanks,

 

 

Community Explorer **

Re: Flat Rate VAT in UK failure

Whilst I accepted that HMRC want the accounts in the way QB prepare them I have since reviewed HMRC guidelines which state my original method is correct and QB and in fairness other packages are wrong.

 

7.8 How do I prepare business accounts for Income Tax purposes while I am using the Flat Rate Scheme? 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. See How to fill in and submit your VAT Return (VAT Notice 700/12) for further details.

QuickBooks Team

Re: Flat Rate VAT in UK failure

Hello there, KevinWhibley.

 

For now, the Flat Rate Scheme (FRS) VAT return is not yet supported. You'll have to submit it through the HMRC website. Though, you can always change the return's status as Mark as filed for recording purposes.

 

Here's how:

  1. Click Taxes, then choose VAT.
  2. Click Submit return, then review the form.
  3. Click the Submit to HMRC drop-down arrow, then choose Mark as filed.

Drop by anytime if you need more help from us. Have a good one! 

 

Community Explorer **

Re: Flat Rate VAT in UK failure

That is incorrect.

Or at least it was sold as a solution to MTD.

It is also approved on HMRC website. 

The VAT return is correct. However it is the P&L and BS that are incorrectly reported.

QuickBooks Team

Re: Flat Rate VAT in UK failure

Hi Kevin,

 

QuickBooks Online will be ready for MTD please find all the details for MTD and QuickBooks on this link here. As you have also mentioned you are right with reports and how FRS works in QuickBooks Online in terms of only showing on the return at the moment, this however may change in a future version based on feedback.

 

Please let us know if there is anything else which we can help with.

 

Thanks,

 

 

Active Member

Re: Flat Rate VAT in UK failure

Hi Kevin,

 

We have just encountered the exact same problem in our practice.

 

All reports show net figures.  In cases where we have tracked Input VAT to show us the net gain/loss on FRS, expenditure is shown net on these reports as well.

 

I have spoken with QuickBooks Platinum Partner support who have advised that there is no current way to have reports show data on a FRS basis.

 

We will be raising this issue with our account manager, however have found in previous instances of QuickBooks not doing things correctly that the only solution is to "submit feedback" which unfortunately does very little.

 

I have submitted feedback on my end, but realistically this is not a simple fix and will likely take months, if not longer, to resolve.

QuickBooks Team

Re: Flat Rate VAT in UK failure

Hi ewan-france

 

Thanks for your response.Though we do not have any current plans to add in new FRS reports it is worth adding in feedback as the more requests we get the better to show our engineers and product developers the need for this change in the product

 

The feedback option is available here

 

Kind regards

 

Emma

Community Explorer **

Re: Flat Rate VAT in UK failure

The best resolution to the problem is to close my quickbooks account immediately.

Such a shame. It really would not be tricky to resolve.

And why should we have to give feedback on a matter they must e fully aware of and has been an issue since 2002.

Bye.

QuickBooks Team

Re: Flat Rate VAT in UK failure

Welcome back to the Online Community, KevinWhibley.


I appreciate you sharing your thoughts regarding the Flat Rate Scheme and how this affects your financial records. Allow me to join the conversation and provide some insights about this.


QBO is continuously working towards providing better features to ensure our customers can manage their business efficiently. Since your voice matters to us, I recommend submitting your thoughts on how you’d like the product to work.


Customer feedback will help our Development Team identify what product enhancements they can add in future updates. You'll be able to add votes for this feature and also get updates.


If you have any other concerns, please know the Community platform is the best place for help in QuickBooks.

Experienced Member

Re: Flat Rate VAT in UK failure

I had a similar problem because most of my sales are VAT inclusive sale items sold on the web or at market. When I occasionally need to invoice I manually add VAT through an item which feeds through to Income on the P&L. I used to create an invoice monthly to calculate the VAT due which fed through to Expenses on P&L (actually I put it under COGS).

 I enter daily sales in a invoice so I can receive total cash and total card payments for the day and enter individual web sale as sales receipts.

 

For whatt it's wprth, this was my solution through trial and error and discovery and it seems to work:

 

  1. Turned on the  Flat Scheme VAT option in preferences and added my Flat Rate percentage of 7.5% there, and put the O (outside of VAT) Vat code in as the default/most frequently used box.
  2. Created a sales VAT code called FR - Flat Rate at 7.5% 
  3. Created 3 Items which were then included in a Group item named ‘4 VAT’    a) VAT due on Gross Sales - feeds through to a balance sheet control account I set up, and applied the FR  - Flat Rate Vat code to it.    b) Contra Vat due on Gross Sales - feeds through to the the same control account as a) above and gave it the O - Outside Vat code.    c) VAT due on P&L - feeds through to the Expense Account on the P&L for VAT as before, and gave it the Z (or ZUK) - Zero Rated Vat code ( this latter is important to give a Net figure in Box 6 on  the VAT return, as Quickbooks adds box 1 and 6 together before applying the Flat Rate declared in the preferences).
  4. Create a Group Item and include the 3 items a) b) and c) in that order - I call mine '4 Vat', and tick 'Print items in Group' before saving.
  5. I pull up this group at the bottom of each and every invoice and sale receipt, and + (plus) the first and - (minus) the next 2. It's total effect is zero and puts the VAT back on the P&L,  the B/sheet Control account zeros out, and the figures on VAT Return are correct. 

example 4 VAT

Gross Sales                   +500  (VAT 7.5% )   37.50  shows up in VAT box

Contra Gross Sales       -500   (Outside VAT)

VAT due P&L             - 37.50   (VAT 0%)

Established Member

Re: Flat Rate VAT in UK failure

Hi

 

I am new to Quickbooks and am very disappointed to find it does not solve my MTD problem of submitting my FRS VAT digitally. All the pomp and ceremony says its fine but it doesn't seem to include what I need. I cant do it on the gateway in future as I have to do it digitally. Major disappointment or am I missing something?

 

Thanks

 

Mark

QuickBooks Team

Re: Flat Rate VAT in UK failure

Hi Mark,

 

Thanks for getting in touch the FRS bridging tool should be ready by the 1st of April you can find updates for MTD on this link here which will take you to our product update page.

 

 

Established Member

Re: Flat Rate VAT in UK failure

Hi there, 

 

Is it possble to create a new tax code in QB at my flat rate and use that new rate for every sales invoice I record rather than 20%? Then choose not to record any VAT on my purchases (in line with the flat rate rules)?

 

That way my VAT liability in the balance sheet and turnover would always be accurate rather than waiting for a return to be filed. 

 

Would that that be making tax digital compliant? 

QuickBooks Team

Re: Flat Rate VAT in UK failure

Hello

 

The system will allow you to create your own code however we would not advise to do this for FRS as it is set separately in the system so it can calculate savings by FRS for example. You can certainly speak to your accountant if you want to do this however it is not something we recommend for making  tax digital compliance

 

Regards

 

Emma

 

 

 

 

 

Experienced Member

Re: Flat Rate VAT in UK failure

Hi there,
I have done this and found a way to make it work for us and also to get the correct figures to appear on the VAT 100 return in the same way as before.

If you do it through turning on the Flat Rate Scheme and percentage under preferences as we did, then you will need to make an adjustment, as the figure posted in Box 6 is the gross sales (as opposed to net of VAT), and QuickBooks FR scheme adds this figure to the VAT figure above before applying the FR percentage to it, making it incorrect. Don't think there's a way round this as you have to calculated the VAT on the gross (VAT inclusive) figure.

It might work better using the regular VAT scheme, but I wanted the VAT 100 to state our VAT % at the top of the return, but not sure how much this matters.

It all depends on how your business works really and figuring out a way to adapt QuickBooks to suit your needs. Historically most of our sales are VAT inclusive unless we send an occasional invoice, where 20% VAT is added to the cost, but it is fed as a separate item through to income.
Now, we have started to put out VAT calculations in manually at the bottom of each invoice or receipt, not sure if these can be hidden if I were actually sending the invoice out to a customer.
Please see my reply a couple of weeks ago 2 or 3 above yours for more details on how we are managing it, may be useful or not.

Cheers and good luck.

 

 

Senior Explorer *

Re: Flat Rate VAT in UK failure

Had a look at the weekend and the Flat Rate Scheme that I use can now be submitted through quickbooks digitally.

The profit and loss is still not right as they insist on removing 20% and then show FRS saving.

This does not work out correctly in my case, shows a lower amount of net profit. When doing income tax return I will still need to do a paper calculation. ( unless somebody knows different ).

This will need to be addressed before we have to submit income tax digitally.

In the flat rate scheme all I / we need is gross takings ( including VAT ) less flat rate %, then deduct expenses ( including VAT ) to get the Net Takings.

If I am wrong on this please advise, but this comes from the Latest VAT notices.

QuickBooks Team

Re: Flat Rate VAT in UK failure

Hello

 

Can we just confirm are you using QuickBooks Online or QuickBooks Desktop?

 

Thanks

 

Senior Explorer *

Re: Flat Rate VAT in UK failure

Quickbooks online

Senior Explorer *

Re: Flat Rate VAT in UK failure

QuickBooks online