Hi,
I'm on the Flat Rate Scheme with HMRC. The rate is 7.5% but get 1% discount in the first year.
When I categorise transactions and enter the VAT should I be adding the VAT I charge customers (20%) or the VAT I pay HMRC (6.5%)?
In Taxes > Edit VAT > Edit Settings I have the Flat Rate Scheme option ticked, with the percentage of 6.50% and the Tax Registration Date of 01/02/2021. If I choose 20% when categorising transactions does QuickBooks work out the correct VAT using the FRS rate in VAT Settings?
When categorising transactions, If I choose 6.5% from the VAT dropdown I get the following error:
'Were sorry, QuickBooks encountered an error while calculating tax. Try reselecting the tax rate or re-entering the product/service item and saving the form again.'
Thanks in advance for any help.
Solved! Go to Solution.
Hi GettingShirty, you should categorise transactions using the standard 20% S VAT code, and then these will automatically be calculated based on the FRS % entered in the VAT settings. :)
Thanks for bringing this up here in the Community, @GettingShirty. I’ll be glad to share what I know about your concern.
Recording VAT on the Flat Rate Scheme (FRS) works the same way as the standard scheme. You need to enter the transactions as you would. You can then use the same VAT rates you'd apply. There are no additional rates required to account for FRS, as QBO calculates it for you when you prepare your return.
Here’s an article to know more about Flat Rate Scheme (FRS) in QuickBooks Online.
If you want to set and edit VAT settings, you might want to visit this page.
Feel free to comment down below if you have other questions about VAT rates in QuickBooks. I'll be more than happy to help. Stay safe.
Thanks for taking the time to reply.
Just one thing I’m not clear on is what VAT rate I enter when categorising transactions. If I put 20% (the amount I charge customers) are you saying that QBO will calculate the VAT using the FRS rate which I’ve entered in the tax settings section. Or should I be categorising transactions using the FRS percentage?
Thanks .
Hi GettingShirty, you should categorise transactions using the standard 20% S VAT code, and then these will automatically be calculated based on the FRS % entered in the VAT settings. :)
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