I’m sure a few days ago I saw a topic on here about the UK VAT Flat-Rate Scheme… but I can’t find it now. I was relatively convinced that you’d already implemented support for it too, but I can’t find that either.
The flat rate scheme, in a nut-shell, is where you charge the standard rate for VAT (e.g. 20%) - but only a portion of that goes to the HMRC. The amount you pay to the HMRC depends on the type of business you run. In my case, I’d charge 20% VAT but pay 14.5%
Is this supported already? If so, where within Manager would I find the options for setting the rate I pay?
When is your next VAT return due? It might be in by then.
This will not change how you do data-entry, you will still need to use the same tax codes. It’s just extra report that will be available which will calculate VAT liability through flat-rate method.
This might be the oldest item on my to-do list. I’ve attempted to add this but more I was reading about UK VAT flat-rate scheme, the more I was appalled by it.
I think the best solution would be to implement simple report that will show tax figures on flat-rate basis. Periodical journal entry would need to be posted to Tax liability account to adjust the balance based on how much flat-rate saves you in comparison to normal VAT scheme.
I think you might have nailed it. Creating tax code with two rates (chargeable & payable) is generic and elegant solution that will satisfy requirements of flat-rate VAT scheme in UK. I should get around to implement it next month.
There is new in-built tax code called “VAT FRS”. You can create it by going to Settings tab, then Tax Codes, then New Tax Code
When you add this tax code, you will be able to edit it to set correct tax rates
So what it basically means is that on invoices, quotes, credit notes etc… your customers will see chargeable rate of 20% but for accounting purposes, your tax liability will increase by payable rate only.
I’m probably missing something here (I’m new to Manager), but I’m not getting the right numbers out of this.
Basically, I have imported my bank statement, and assigned a payment from a customer for £432 as income with FRS VAT of 20/14.5 as per your example. So that specific payment would be a sale for £360 + £72 VAT (at the 20% they paid), which makes up the £432 on my bank statement.
The VAT liability that I should effectively have on that sale is 14.5% of the gross amount, i.e. £62.64.
Manager is giving me a tax liability of £54.71, which I cannot see how it is arriving to, since that isn’t 14.5% of the gross or net amount.
Am I missing something here? Should I not be applying tax codes like that to income records on my bank statements?
You are right, I didn’t realize flat rate given by HMRC is on tax inclusive amount. The calculation in the program assumed the rate is on tax exclusive amount which wasn’t correct.
This has been now fixed in the latest version (14.10.11)
Corporate tax is not on your earnings like flat VAT. It is on your taxable profit. Every tax-deductible expense is decreasing your taxable profit.
Not to mention, by using this inflated tax rate, you are essentially decreasing your income on P&L which is not correct from accounting point of view.
In future, new module could be implemented which could handle it by estimating your corporate tax and making automatic entries but for now, corporate tax should be entered as an expense once a year by journal entry which is traditional method.
Oh yes, I fully intend on changing my VAT FRS tax code back to 14.5% and making a journal entry to account for corporation tax. It’s just that the 31.6% gives me an accurate estimation/visualization of my true ongoing tax liability for now.
I have very little expenses so my corporation tax liability is effectively just 20% on my earnings after the 14.5% VAT (20% of the remaining 85.5%, hence the 31.6% tax in total).
I would definitely welcome a module to do this nicer though! At the moment, the #1 requirement for me in an accounting app is to calculate my total tax liabilities as I go.
I’m new to using Manager (which is excellent for my needs) although I don’t seem to be able to get the VAT FRS working correctly.
For instance, on a sales invoice with a net value of £7040.00 it calculates a VAT liability of £1,224.96 (this is shown in Tax Payable). However, the correct liability should be £1020.80 based on 14.5% Flat Rate.
I’ve added the VAT FRS tax code and have also edited it to set the correct Payable rate (14.5%) and am using that rate on my invoice. Could someone tell what I’m missing?
Also, I did see mention of a Corporation Tax element being added, did this get done?
It looks like if only VAT FRS tax code was used, the invoice could not be set as tax inclusive. Anyway, I fixed this issue in the latest version (15.1.75).
Make sure to check the box “Amounts are tax inclusive” on invoice form once you upgrade.
We have a similar flat-rate tax scheme here in Switzerland. Allowing to charge 8% and only having to pay 6.1%. Is there a way to implement this, or allow something similar in customization?
