You can only have one flat rate percentage in a single VAT period. The flat rate percentage can change from time to time–and if it does, you’ll need to make sure you adjust your VAT return accordingly.
According to HMRC, businesses will have to use the same value for their VAT rate until the end of the VAT period, and then use the new rate in the following period. Let’s take a look at what you need to do in QuickBooks if the flat rate changes mid-way through a tax period.
1. Run the VAT 100 report with the old flat rate
The first thing you need to do is run the VAT 100 report with the old rate from the beginning up until the last day of the VAT period. This will give you an accurate picture of how much VAT is due. Once you have that figure, you can then work out the new rate for the remainder of the period. Make sure you apply the new rate from the first day of the new period–any earlier and you’ll end up overpaying VAT.
2. Take note of the amounts you’ve already paid or invoiced at the current rate
It’s important to stay on top of your VAT obligations. Keeping track of the amounts you’ve paid and invoiced at the current rate is one way to do this. Take note of the amounts before changing the rate in your VAT settings.
3. Adjust your VAT return
Make the necessary adjustments to your VAT return to help ensure that you’re correctly accounting for all VAT payments and invoices. Adjust Box 1 to show the correct VAT amounts due. You don’t need to adjust Box 6 as this is the gross amount of sales and isn’t affected by the rate change.