With making tax digital being phased in, business owners need to fill in flat rate VAT returns. You can do this using HMRC approved bookkeeping software like Xero or Quickbooks. However, despite the automation, whether you are an accountant, bookkeeper or business owner, it remains helpful to understand what figures should (and shouldn’t) be appearing on the VAT return. This is so you know that the right figures have been picked up. In this guide, I run through what should be included in each of the 9 boxes so you have peace of mind when it comes to filling in a flat rate VAT return.
Updated 14 July 2021
Table of contents
- 1. How to Fill In a Flat Rate VAT Return
- Box 1: VAT Due on Sales and Other Outputs
- Box 2: VAT Due on in this Period on Acquisitions from other EC Member States
- Box 3: Total VAT Due
- Box 4: VAT reclaimed on Purchases and other inputs (including EC acquisitions)
- Box 5: Net VAT to be Paid or Reclaimed
- Box 6: Total Value of Sales
- Box 7: Total Value of Purchases
- Box 8: Total Value of Supplies of Goods excluding VAT to Other EC Member States
- Box 9: Total Value of all Acquisitions of Goods and Related costs, excluding any VAT, from other EC member states
- 2. Flat Rate VAT Return Example
1. How to Fill In a Flat Rate VAT Return
You’ll need to fill out your flat rate VAT return online using an HMRC approved bookkeeping system that automatically transmits the figures to HMRC on your behalf. If you’re using cash accounting when filling out a Flat Rate VAT Return, you must include figures based on when you were paid by your customers or paid for any capital assets over £2,000. However, if you choose to use the invoice basis, the figures in your flat rate VAT return must be based on the date that you invoice your customer and receive invoices from your suppliers. Whichever you choose, make sure you have configured the settings correctly in your bookkeeping software. In doing this, it knows which invoices it should be including on your flat rate VAT return.
There are penalties for missing VAT deadlines and making mistakes on returns.
Let’s work through box by box what you need to include and how to work out the numbers you need:
Box 1: VAT Due on Sales and Other Outputs
In Box 1, you’ll find the amount of flat-rate VAT that you’ll need to pay to HMRC. This figure is calculated by multiplying sales for the quarter (either paid or invoiced, depending on the VAT scheme you are using) including VAT by the flat rate percentage for your business.
So, say for example, that you have invoiced your customers £10,000 including VAT and your flat rate percentage is 14.5%, you would include £1,450.00 in Box 1.
Box 2: VAT Due on in this Period on Acquisitions from other EC Member States
If you have not bought any goods from EC member states then 0.00 will appear in Box 2 of your flat rate vat return. If you have purchased goods (not services) from EC member states, then read this on Box 2 EC Acquisitions to find out how to handle these types of purchases and what figures will be generated in this box.
Box 3: Total VAT Due
Total VAT due will be calculated automatically by your bookkeeping system for you. It is the total of Box 1 and Box 2 added together.
Box 4: VAT reclaimed on Purchases and other inputs (including EC acquisitions)
When you are on the flat rate scheme you do not claim back VAT on expenses so you’d expect to see £0.00 appear in Box 4 unless:
- You are claiming for capital asset purchases over £2,000 including VAT. If this is the case, you’ll see the amount of VAT you paid or;
- You have made EC acquisitions and need to enter details of the goods you have bought on your VAT returns.
Box 5: Net VAT to be Paid or Reclaimed
Box 5 is automatically calculated, but it is the difference between Box 3 and Box 4. This is the amount you’ll need to pay to HMRC or the VAT repayment you are owed.
Box 6: Total Value of Sales
Box 6 will show total amount of income that you used to work out your flat rate percentage including VAT. This is the figure that was invoiced or paid by your customers including VAT at the standard rate of 20%, not your flat rate percentage.
Box 7: Total Value of Purchases
When you are on the flat rate scheme, you do not claim back VAT on your purchases. Generally, this box will say £0.00 unless you:
- Are claiming for capital asset purchases over £2,000 including VAT, in which case the amount of what you have purchased excluding VAT will appear or;
- Have made EC acquisitions and need to enter cost (excluding VAT) of the goods you have bought.
Box 8: Total Value of Supplies of Goods excluding VAT to Other EC Member States
Box 8 of your flat rate return will show £0.00 unless you have supplied goods to other EC member states. In this case, you would need the total cost of the goods (not services) you have supplied, excluding VAT, in this box.
Figures entered in box 8 will also be included in your box 6 total as well.
An entry in this box may result in a request from HMRC for you to complete an EC Sales List. This breaks down details of the amounts and which countries you have supplied.
Box 9: Total Value of all Acquisitions of Goods and Related costs, excluding any VAT, from other EC member states
If you have not bought goods from VAT registered businesses in EC member states, then put £0.00 into this box. However, if you have bought these goods then the net amount of these purchases will appear in Box 9. You can find out more details on filling out Box 2 for EC Acquisitions in this guide.
Any figures entered in this box will also be included in your box 7 total as well.
2. Flat Rate VAT Return Example
Jo is a self-employed bookkeeper earning £100,000 per year so must register for VAT. She is looking at the different VAT schemes available and is considering joining the VAT Flat Rate Scheme. She wants to do this because it simplifies her VAT administration, as well as resulting in a ‘profit’ from using a lower VAT percentage.
Jo decides to register and her flat rate percentage is 14.5%. However, it must still show the standard rate of VAT 20% on every invoice she sends to her clients.
In one VAT quarter, Jo has the following figures:
- Client invoices £25,000 plus 20% VAT (total £30,000);
- Bought a computer for £1,800 plus 20% VAT (total £2,160).
The Flat Rate VAT return in this example will look like this:
|Box 1 (£25,000 x 14.5%)||£3,625.00|
|Box 4 (£1,800 x 20%)||£360.00|
|Box 7 (£25,000 x 20%)||£30,000|
Jo can only claim back the VAT on her new computer but no other expenses since it meets the rules for claiming back VAT on capital assets over £2,000.