Flat rate scheme VAT

Hi Havana,

I'm happy to help you learn a bit more about the process of flat rate VAT on QBO. I hope you'll find these community pages as informative as we do, and i hope you learn lots of tips and tricks off other peoples posts.

With QuickBooks Online, our VAT Engine works where it posts the full amount of VAT to the VAT Control account; and the transfer of funds into being recorded on the FRS Gains/Losses account happens when you mark the period as Filed.

For example, £1000 transaction exclusive of £200 VAT totaling £1200 payable. 20% S Code posts £200 to the VAT Control Account. Say you've got FRS of 12%. When you mark the return as filed on QBO the system will move the difference to the FRS Gains/Losses account. In this case it would move £67.20 to the FRS Gains/Losses and £172.80 to VAT Suspense.

VAT Suspense account should be the balance due to HMRC based on your VAT return screen. Whether you're making a gain, or a loss if you've had lots of purchases, it will show on your Profit & Loss Account as an income or an expenditure.

The key to understanding what you're looking at on your reports is to understand that the system only makes these movements of funds when the period is marked as filed on QuickBooks Online.

If you have any questions, or want me to elaborate anything, just let me know.

Thanks,

Where do you get £67.20 and £172.80 from?

Hi Havana,

I'll try that one again, I'd not clicked Save on my test transaction and gave £1200 Exclusive of VAT so hence the £172.80 - My bad!

Here goes.......

For example, £1000 transaction exclusive of £200 VAT totaling £1200 payable. 20% S Code posts £200 to the VAT Control Account. Say you've got FRS of 12%. When you mark the return as filed on QBO the system will move the difference to the FRS Gains/Losses account. In this case it would move £56 to the FRS Gains/Losses and £144 to VAT Suspense.

Thanks for coming back so quickly ^_^

Thanks.

So what happens to the input VAT that has been posted to the control?

Hi Havana,

So the Input VAT that has been posted to the control account (£200 in my example) is split between VAT Suspense to be paid to HMRC and the Gains/Losses by FRS Account - Which will then reflect either a saving or a loss on your profit and loss.

The actual amount which you've received and you've maintained as a saving, is at this point sitting in your Bank Asset Account. You basically don't pay the input VAT amount you've saved to HMRC.

Don't be afraid to point out where i'm misunderstanding you (If i am).....

Thanks,

Thanks James.

Last question....

What figure is the flat rate VAT calculated on.  Is it the net figure in the sales account in the general ledger, grossed back up for 20%.  For example, if the general ledger sales account shows £26,203 is the flat rate vat at 10.5%, £26,203 divided by 5 and mulitiplied by six and then by 10.5%?i.e. £3,301?

In a nutshell, yes that's correct. Add the VAT Gross to the Net Figure in the Sales Account, then times the whole amount by your flat rate scheme calculation which is 10.5%.

In the example of £26203: £5240 is Gross VAT, £3302 goes to VAT Suspense, £1938 is marked as Savings by FRS.

So £26,203.2 * 20% = £5240 Gross VAT

£26203 + £5240.60 = £31443 Net Sales including Gross VAT

£31443 & 10.5% = £3302 = FRS VAT payable to HMRC

£5240 - £3302 = £1938 = Savings by FRS for you to keep

(I have not included decimal points in these examples!! technically its 3301.58 Payable to HMRC^^)

Thanks,

So sadly James that wasn't my last question!

1)What could be the reason why there is a balance left on the VAT control after the two journals have been done.  One journal takes the flat rate outputs and the other takes the difference between the two rates of output vat and the input vat .  This should leave zero but my client has a different balance left each quarter.

2)The first two quarters my client used QuickBooks the figures did not work.  If I take the sales figures and gross them up they are not even close  to the box 6 figure on the VAT return.  Could you give some suggestions for this please?

Thank you

Hi Havana,

Thanks for clarifying for me. I've rechecked my journals, and my maths and on my books; the FRS clears the VAT Control account. I think we might need to take advantage of our screen sharing system, to get a live look through the clients VAT Control account to try to find where the error is occuring.

At first thought, i'd be checking for transactions posting to the VAT control account that aren't getting picked up by the FRS calculations, I'd be checking to see if there are any transactions from outside that quarter that are affecting the balance. Box 6 would only ever be the net value of sales, it wouldn't post the gross amount including the 20% to box 6.

Call our Pro Advisor Line if you have a QBOA Firm file with ourselves on 0808 168 8175 - Let the pro advisor team take a look and see if they can dig out the root cause of the differences left.

Thanks