When a VAT registered business sells items, it must record the VAT it charges - known as the Output tax, and which must be paid to the Government. However when items are purchased - it pays VAT to the supplier - known as the Input tax, which can be reclaimed from the Government. The end result is that the business only pays the Government the difference between the two amounts.
This program helps you to apply and track VAT sales and purchases and to generate your VAT return.
NOTE: There are multiple special cases - including VAT charged and claimed on entertainment expenses, on purchases and sales abroad, on VAT excempt goods, etc., You must familiarise yourselves with the requirements appropriate to your business.
VAT Return
The 'VAT Return' button calculates and displays your VAT 100 return form. The submit button transfers your VAT payment from your chosen cash account to the VAT Balance account, which records your payment to HMRC. It also stores the form in the database, so it can be viewed via the 'Previous VAT returns' button.
For clarity - the cash account, VAT Balance account, and the submit process mentioned here all refer to accounts and processes on the VATStuff database - the program does not do any online transactions - you still have to submit your VAT form and payments the usual way - this program records them, and helps you calculate them but does not actually do them.
Once submitted, you will not be able to create any further purchases or sales with dates in the period covered by the submitted VAT return.
VAT Correction
If, besides the normal VAT return, a further sum has to be sent to HMRC, or is received from them, this button can be used to implement the movement. It also allows you to input a longer description, so you have a record of why the payment was made, and you can view previous payments.
VAT report
The 'VAT report' button lists your purchases and sales, showing how the inputs and outputs were calculated for the current, or a previous, VAT period.
VAT detail
Like the 'VAT report' the 'VAT detail' button lists your purchases and sales, but with greater detail, showing how each box of the VAT return was calculated.
Using these detail reports, you should confirm the VAT calculations are correct - particularly if you fall under any special cases not covered by this program. It is also possible these calculations are not correct due to faulty understanding of how VAT should be calculated on the part of this programs author. If you have a better understanding, please provide your feedback.
List VAT payments
Create a report showing VAT payments to HMRC between two dates.
EC Sales List
If you make sales to non-GB VAT-Registered EC companies, you must complete an EC Sales List. This program creates one - but does not handle complex cases, such as where you have made supplies as the intermediary in intra-EC triangular trade. The program relies on the fact that when adding customers you have correctly set their EC status and VAT registration number.
Previous VAT returns
You can view, and create pdf records, of previous VAT returns which have been submitted.
Set VAT Rates
This button shows a table of VAT Rates, these will be available as a drop down list of choices when you add items to Purchase Orders or Invoices. The list can be edited should the Government issue new VAT rates.
Set VAT Scheme
The appropriate VAT method should be set for your company when you initially start using the VATStuff program. You should take advice on which method is appropriate to you - since for most there are special conditions, and you will need to apply for them. The program only handles quarterly VAT payments. The following summarises the choices:
Standard
Also known as the Accrual method. VAT is accounted for on the invoices issued and received.
Cash
VAT based on the actual payments, instead of the invoices. This scheme is only available to businesses with a turnover below a threshold - check Government issued information for the current criteria.
Flat
For businesses which qualify, VAT can be paid on a fixed percentage of sales, with no reclaim of input tax; you have to set the correct percentage value (which varies by trade sector).
The Flat scheme payments can be calculated from your invoices sent (Flat - Basic), or from payments received (Flat - cash).
VAT can be reclaimed for some large purchases, but VATStuff does not calculate these - you will have to track such purchases and make the claims manually.
Not Registered
If you are not VAT registered this program does not calculate VAT returns, and your invoices are created without the VAT column.
The Transactions
This section describes how VATStuff moves money when a return is submitted:
When a return is submitted, the VAT owed is moved from your cash/bank account to the VAT Balance account, which, as it normally shows a credit from your sales, is debited to zero - showing your VAT has been paid. (In fact it will probably not show zero - as sales and purchases for the next VAT period will start appearing there.)
The actual amount moved when the return is submitted depends on the invoice dates (or strictly speaking, the taxpoint dates) for the standard method, and the payment dates for the Cash method.
If you have not been selling anything - but only making purchases, then the VAT Balance will show a debit - and in this case HMRC owes you money, and submitting the VAT return will move money from the VAT Balance account to your cash account.
With the Flat schemes, you cannot claim the VAT on your purchases back, and only have to pay a set percent of your sales VAT, so in this case, after the amount owed to HMRC is transferred from your cash account to the VAT Balance account, any credit left over is not owed to HMRC. This is recorded by a transfer from a 'VAT Income' account (under the system folder) which brings the VAT Balance account back to zero.
On some Purchase orders you may have unticked the 'claim VAT back' checkbox (only available when the Standard or Cash schemes are in use) - this is normally always ticked, however it can be unticked for certain expenses for which VAT is not recoverable. In this case, the transactions are as described above, but when your VAT return is calculated, any invoices or payments associated with this order are not included in the Input tax - and the VAT submission transaction shows this by transferring the VAT amount on these invoices from the VAT Balance account to an 'Unclaimed VAT' account - also under the system folder.
On the Flat schemes; all Purchases are unclaimed VAT - and all their VAT goes to the 'Unclaimed VAT' account.
The debit amount in the Unclaimed VAT account is therefore a record of VAT on purchases, for which you were unable to claim your VAT back. It is not continuously updated as purchases are made - it is only updated as a VAT return is submitted.
For non VAT-registered users it is not automatically updated at all, as all their unclaimed VAT just accumulates in the VAT Balance account. Such users could manually move the full balance from the VAT Balance account to the Unclaimed VAT account at regular intervals if they wish to record it over time. It would also be sensible to do such a move if a user is changing from being unregistered to VAT registered - so previous unclaimed VAT is recorded at the time of the change.
To summarise:
Therefore the Unclaimed VAT account is an expense - it is money you have had to pay your suppliers (and via them to HMRC).
The VAT income account is income, as this is VAT you have charged your customer, but have not had to pay back to HMRC.
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