VAT Flat Rate Scheme – Completing the return.

The flat rate scheme is designed to simplify the VAT accounting process for small businesses with taxable turnover of £150,000 or less (as at May 2016). An overview can be found here.

FILLING OUT THE ONLINE VAT RETURN FORM

All the boxes on the return MUST be completed. If a box is not relevant, insert ‘0.00’. If negative numbers need to be inserted, insert the minus sign (-), for example, -500.00.

To help fill out the boxes, let’s assume a trader has the following transactions:

a. Net sales (ie pre-VAT) £1000.00

b. VAT charged on invoices to clients/customers: £200.00

c. Gross Turnover (a + b): £1200.00

d. Flat rate (apply to c) – assuming 14.5%, we apply the rate to £1200.00 to get £174.00

(NOTE, if in the first year, deduct 1% to get 13.5% of £1200.00 = £162.00)

Box 1: VAT due on sales and other outputs

£174.00 (or if in the first year of VAT registration, £162.00)

Box 2: VAT due (but not paid) in the period on acquisitions from other member states of the EC

Here, we enter the VAT due on all goods and related costs purchased from VAT-registered suppliers in other EC member states – such purchases are referred to as ‘acquisitions’.

Not applicable in our case, so we enter ‘0.00’.

Box 3: total VAT due

Add Box 1 and Box 2 to give £174.00. This is done automatically.

Box 4: VAT reclaimed in the period on purchases and other inputs (including acquisitions from the EC)

This will be normally be 0.00 unless there is a single purchase of £2000.00 or more including VAT. Bad Debt Relief is also claimable here.

Box 5: VAT to be paid to HMRC or reclaimed

This is the difference between Box 3 and Box 4. In our case, it will be £174.00.

If Box 3 is greater than Box 4, the difference is payable to HMRC.

If Box 3 is less than Box 4, the difference is due to us from HMRC.

If Box 3 is the same as Box 4, the difference is zero BUT a return must still be submitted.

Box 6: total value of sales

For flat rate purposes, this box must be allocated the GROSS turnover, so we enter £1200

Box 7: total purchases excluding VAT

This will normally be zero UNLESS Box 4 or Box 2 above has a value greater than zero. If either has values greater than zero, enter the applicable value (less VAT) in this box.

Box 8: total value of all supplies of goods and related costs, excluding any VAT, to other EC member states

Self explanatory. This is only required if goods are sold to VAT-registered businesses located in other EU countries. If a value greater than zero is entered here, it must have been included in Box 6 as well.

Box 9: total value of all acquisitions of goods and related costs, excluding any VAT, from other EC member states

Self explanatory. This is only required if goods are acquired from VAT-registered businesses located in other EU countries. If a value greater than zero is entered here, it must have been included in Box 7 as well.