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How to set up the Flat Rate VAT Scheme in QuickBooks Online

by Intuit Updated 1 year ago

In this article, we'll explain how to set up your VAT Flat Rate Scheme (FRS) in QuickBooks Online, and how to make changes to transactions in a filed VAT period. We'll also show you how to make adjustments to your VAT return, so you can be sure you're getting the most out of the scheme.

To switch on the FRS in QuickBooks Online

There are a number of different ways to submit a VAT return in QuickBooks Online. The FRS is a popular method for small businesses. To switch on the FRS, follow these steps:

  1. Go to Taxes and select VAT (Take me there).
  2. Select Edit VAT, and then Edit settings.
  3. Tick the Flat Rate Scheme (FRS) box.
  4. Enter your flat rate percentage and your tax registration date.
  5. Select Save.

Because of the way Making Tax Digital works on the Flat Rate Scheme, you can't edit or delete transactions in a return that has already been filed.

If you need to make changes to a transaction that has already been filed, here's an example of an invoice with 20% VAT and how to reverse it.


First, you'll need to create a journal entry to reverse the original transaction. This can be done by reversing the amounts of the debits and credits.


Once the journal entry has been created, you can create a new transaction with the correct information.


The best way to make sure it's done correctly is to use the transaction journal for the transaction you want to change and reverse the amounts that are in the debits and credits column. Then, enter the applicable VAT code in the VAT column of the journal entry next to the line that had VAT in the original transaction.

If you make any adjustments to the amount in Box 1, it'll no longer affect the amount in Box 6 (net value of sales). To make adjustments to Box 1, follow these steps:

  1. Go to Taxes and select VAT (Take me there).
  2. Next to the return you wish to adjust, select Prepare return.
  3. Next to Box 1, select Adjust.
  4. Choose the correct Adjustment account, and then enter the Adjustment amount.
  5. Once you select Save. You'll be asked to confirm the new adjustment. Read the message carefully and if you agree, select Go for it.

That's it! The new adjustment will show next to Box 1 on your VAT return.

It's important to be aware of the potential for the rate on the Flat Rate Scheme to change midway through a tax period. If the VAT rate changes while you are partway through a tax period, there are a few things you need to do:

  1. Run the VAT 100 report with the old rate from the beginning up until the last day of the period.
  2. Take note of the amounts you've already paid or invoiced at the current rate before changing the flat rate percentage in your VAT settings.
  3. Run the VAT 100 report with the new rate starting from the beginning up until the last day of the VAT period and take note of the amounts.
  4. Make the adjustments on your VAT return, 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.

If you're thinking of leaving the Flat Rate Scheme, there are a few things you need to know.   

  • You can leave the scheme at any time by writing to HMRC 
  • You will normally only leave at the end of a VAT accounting period
  • HMRC will confirm the date you left the scheme in writing
  • You must notify HMRC if there are significant changes to your business which could affect your ability to use the scheme, such as a change in ownership or a change in the way your business is run
  • HMRC may take you off the flat rate scheme if they find that you have calculated your VAT incorrectly, or if you have become ineligible for the scheme but have not told them
  • When you leave the Flat Rate Scheme, you can only rejoin it after a minimum of 12 months have passed

Once HMRC confirms the date of your departure from the scheme, here’s how you can leave the scheme in QuickBooks: 

  1. The Taxes section in QuickBooks, and select Edit settings.
  2. Untick the FRS box.
  3. Select Standard or Cash as the new VAT accounting method.

You may leave the scheme at any time by telling HMRC, though you will normally leave at the end of a VAT accounting period. HMRC will confirm the date you left the scheme in writing.

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