Before I highlight this issue, please can nobody from Intuit suggest I contact support. I have multiple tickets open and I'm getting NOWHERE. Additionally, do not suggest contacting an accountant. This isn't an issue for an accountant. This is an issue with Quickbooks Online and the fact that descriptions on the in-built VAT codes provided by Intuit are not only totally wrong but will have caused many, many businesses to incorrectly account for VAT.
When I set-up my VAT codes when starting to use QBO, I read the VAT codes guidance within the application (a screen shot is here) which can also be found by selecting the VAT box in any transaction and scrolling up to Manage Rates.
It explicitly states that (underlines for emphasis):
On that basis, I was using 20% RC SG for the goods (stock) purchased from my EU suppliers.
I am on FRS for VAT and buy my stock mainly from the EU. I have contacted support multiple times to tell them that my VAT returns are not be calculated correctly - they simply don't understand or care. As reverse charge transactions are effectively dealt with outside of FRS (because they net out) and I have no capital allowances over £2,000 to claim, I did not understand why QBO kept calculated that I was due significant refunds from HMRC each quarter. Based on my sales and netting out reverse charge transactions, as well as the low value of my other expenses, I should owe money.
I have spent hours trying to work through the issue and it is simply because the descriptions of the VAT codes within the QBO application - which is what most people will rely on - are totally wrong and do not represent the way the application calculates VAT.
RC SG populates boxes 1, 4, 6 and 7 but boxes 2, 4, 7 and 9 need to be populated for the EU reverse charge VAT to be accounted for correctly and that only happens with 20% ECS/ECG. Intuit does actually know that because they have the correct descriptions here - Common VAT Codes
In that guidance the descriptions are:
Those descriptions are WILDLY different from what is in the application and NOBODY at Intuit seems to understand that this is a serious issue. They also don't understand that phoning an accountant isn't an appropriate response!! Because it's the descriptions they have applied, not my understanding of how to account for my transactions that's the issue, bear no resemblance as to how those individual codes are calculated in the system:
Therefore, in my case, by using RC SG as directed by the description and information provided in QBO by Intuit, I have not been accounting for any EC reverse charge transactions as boxes 2 and 9 have not been used at all. I have now tested this multiple times.
I have finally had one support agent (John Del M) confirm, in writing, that I am absolutely correct only to be quickly side stepped by his supervisor (Nina) when she also realised the gravity of the issue to tell me it was a problem for an accountant.
I now need to spend hours manually adjusting hundreds of VAT Codes and trying to work out how I am going to find the thousands and thousands of £ I actually owe HMRC.
Intuit's response to the issue is an utter disgrace.
It is this simple: If you are one of the many businesses that has relied on Intuit's description of the EU reverse charge VAT Codes in its own software and you have submitted those returns, those returns are completely wrong and you owe HMRC money.....
I'm here to offer my help, ReinTrading.
I understand that VAT may sometimes confusing but I don't want you to feel that way. The VAT flat rate depends on the type of business you have. The HMRC will be the one who'll advise you to what is the flat percentage rate to be used. QuickBooks Online only calculates the VAT based on the rate that has been set up.
You'll want to check these articles for more details:
Additionally, here's an additional reference about VAT FRS from HMRC: VAT Flat Rate Scheme.
Please comment below if you have more clarifications. I'll be here and keep safe!
I don’t need support from HMRC to know that the Intuit descriptions of its own VAT codes are wrong. I do not need advice on which flat rate percentage to use and indeed nothing in my original post mentions that.
I am not confused by the VAT flat rate scheme - I cannot see what gave you the impression that I was seeking the kind of response you have provided.
I am, however, very confused by Intuit’s approach to providing the wrong descriptions for its own codes. What everybody needs further clarification on is why the descriptions and guidance on the in-built Intuit VAT codes in QBO are wrong.
The internal 'help' section from Manage Rates is garbage of the first water.
is better but still badly worded & laid out.
Yep, it's really terrible @paul72.
What's worse is that Intuit seems determined a) not to acknowledge it's an issue b) do noting about it and c) simply tell customers to ring an accountant or HMRC to side-step the issue which is of their making and only they can fix.
The approach they take to this kind of feedback is really weird and unhelpful.