Question for all XERO users and any other accounts package - BOX 7 VAT return

Back
  1st Dec 2017 - 11:12 1st Dec 2017

Question for all XERO users and any other accounts package - BOX 7 VAT return

My question relates to how Xero handles VAT from suppliers who are not registered for VAT
I am particularly referring to freelancers.
Is a charge from a freelancer an input when the supplier is NOT registered for VAT?
i.e. should the amounts billed be included in BOX 7 of a VAT return?
At the moment XERO - by default - does NOT do this.
I realise this makes no difference to the amount taken by HMRC for VAT but it does skew the VAT figures, making me look far more profitable than is the case.
Am I justified in fearing  HMRC might compare my VAT inputs and outputs with my self assessment figures and start asking questions?
and need I worry that my returns are not strictly accurate.

  1st Dec 2017 - 11:18 1st Dec 2017
Iain Weir
Weir Associates Ltd
Quote: Steve Stephens (Jam96)

My question relates to how Xero handles VAT from suppliers who are not registered for VAT
I am particularly referring to freelancers.
Is a charge from a freelancer an input when the supplier is NOT registered for VAT?
i.e. should the amounts billed be included in BOX 7 of a VAT return?
At the moment XERO - by default - does NOT do this.
I realise this makes no difference to the amount taken by HMRC for VAT but it does skew the VAT figures, making me look far more profitable than is the case.
Am I justified in fearing  HMRC might compare my VAT inputs and outputs with my self assessment figures and start asking questions?
and need I worry that my returns are not strictly accurate.

Hi Steve, I think you are doing waht many new Xero users do and using the "No VAT" code for these. This is inocrrect you should be using "Zero Rated VAT" so that the cost appears in Box 7. Whether somebody is registered for VAT or not is not a factor their costs should be included in Box 7. "No VAT" should only be used for accounting adjustments eg accruals or things like cash movements eg Dividend payments. Thanks Iain

 

 

  1st Dec 2017 - 11:19 1st Dec 2017
Carl Ford
Honey Bee Accountancy

HMRC would be more concerned if the value of the output VAT was inline with the reported sales. Xero is set-up by default to treat invoices correctly, I'd be suprised if the freelancer invocies were correctly treated on the vat return. We've been using Xero for 4 years and have never encountered a problem.

 

  1st Dec 2017 - 11:46 1st Dec 2017

Ian
Thank you for the speedy response. I take issue with you on the Zero Rated category as I view this as being where you post item(s) from a supplier that are in fact zero rated.
A typical example being printed items - ie leaflets - But this is purely semantics.
I have come up a work-around - created a new VAT heading with a rate of 0%

Carl
Did you miss out the word Not from the first line of your post -
...VAT was inline with...

  1st Dec 2017 - 16:30 1st Dec 2017
Iain Weir
Weir Associates Ltd
Quote: Steve Stephens (Jam96)

Ian
Thank you for the speedy response. I take issue with you on the Zero Rated category as I view this as being where you post item(s) from a supplier that are in fact zero rated.
A typical example being printed items - ie leaflets - But this is purely semantics.
I have come up a work-around - created a new VAT heading with a rate of 0%

Carl
Did you miss out the word Not from the first line of your post -
...VAT was inline with...

Steve,

Whatever works for you but it shouldn't be "No VAT" as this exlcudes the item from the VAT return and box 7.

Thanks

Iain

 

To reply to this topic please sign in or register.