UK VAT summary return

Last month I needed to complete my quarterly UK VAT return and had hoped to use the ‘VAT Return (UK)’ summary report. I realised this isn’t configured correctly when dealing with purchases and sales to the EU, and have seen some other forum topics referring to the crowdsource site to help construct country-specific summary reports.

I have been setting one up for the UK so that EU VAT is correctly accounted for, but have a two requests related to the UK built-in VAT codes (which this form refers to).

Firstly, there is a terminology issue - the UK HMRC refers to purchases and sales within the EU as Acquisitions and Disposals respectively. It would make sense to have the VAT codes use the same terminology, as Imports relates to purchases from outside the EU. Please could we update the two VAT codes as follows:
‘United Kingdom - VAT 20% on Imports’, should be ‘United Kingdom - VAT 20% on Acquisitions/Disposals’
‘United Kingdom - VAT 5% on Imports’, should be ‘United Kingdom - VAT 5% on Acquisitions/Disposals’

Secondly, we need to account for all EU acquisitions/disposals even those that are zero rated or exempt. Please could we have an additional built-in VAT code (at 0%) : ‘United Kingdom - VAT Exempt on Acquisitions/Disposals’

Finally, perhaps someone with greater accounting knowledge than me could clarify the difference between zero-rated and tax exempt for VAT purposes. I have presumed the terms are synonymous.

That seems like a question for your accountant or the local tax authority. It has nothing to do with Manager’s operation.

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Most probably, but I was (still am) hoping that someone who regularly uses Manager for UK VAT returns may offer some insight.

From what I have read up this afternoon, there is a subtle difference between ‘0% VAT’ and ‘VAT Exempt’, and to correctly allocate VAT when using Manager’s built-in VAT codes which link to the UK VAT Return Summary then we need two further built-in codes. Namely: ‘United Kingdom - VAT 0%’ and ‘United Kingdom - VAT 0% on Acquisitions/Disposals’

I’m open to suggestions on this matter.

Note this does link back to item 4 of Free Accounting Software | Manager - is the plan for these reports to use custom or built in codes? Will this be rolled out in the next month or two?

I have two companies that pay VAT. One is on the flat rate scheme so zero rate and exempt rate do not apply. The other is on standard VAT accounting and zero rate is for all those items that do not have a vat element but must be included on the vat return and exempt is totally ignored for the vat calculations. I have both these rates set up on manager. The following is a list from the UK HMRC website of exempt items. I regret that I do not have any EU vat to record but the VAT RETURN on manager does record my figures correctly as I do a double check on the figures.

The idea is that new in-built tax codes will be added and there will be also new way to generate VAT return for UK.

It’s currently #2 item on my roadmap so the missing pieces will be in the program this or next month. Then it’s up to the community to contribute their knowledge to make UK VAT reporting as good as it can possibly be.

Exempt are Outside of VAT scope.

Hello. I’m sorry, that’s not quite the case.

There are five types of transaction for VAT in the UK. These are : 1. Standard rate (20%) ; 2: Reduced rate (5%), 3: Zero rated ; 4: Exempt, and 5: Outside the Scope.

Currently, Manager only holds four rates - the first four, and yes, I currently utilise the Exempt tag for both Exempt AND Out of Scope transactions and then make manual amendments on the tax summary to correct before submission. However, April 2019 sees the introduction of a genuine horror for UK businesses, the MTD ( that’s Making Tax Digital ) legislation, which will require all VAT-registered businesses to report all VAT, on both sales and purchases, broken down into the five categories noted above, and be submitted digitally ( ie: not manually input via the taxman’s website). That’s right, my little fix won’t work any more.

It goes without saying that having the five categories available in Manager by then would be, er, more than a little helpful, shall we say ?!

@lubos should add the additional UK tax code. But he likes to see a link to official documentation before doing so. Can you provide one?

If nothing is changed, you can always create your own custom tax code for Outside the Scope.

There is some significant work I’m planning to do regarding tax codes and what I have in mind will solve this issue before April 2019.

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Hello Lobos. You will not remember but I raised this whole Making Tax Digital in the UK last year. Here is the link to the information. VAT Notice 700/22.

Manager will have to accept interactively csv and api files. Not only to and from HMRC but alsio from external data suppliers. For instance, receipts will need to be stored digitally, There are already companies offering services to capture photographs from mobile telephones of receipts and invoices for storage (7 Years) which are then run through OCR software to extract the data for inclusion in a csv file.

The same facility is being offered to accept PDF supplier invoices for extraction into csv files.

All csv files can then be imported into Manager. The VAT returns must then by automatically transmitted to HMRC through their API from 1 April 2019. The current VAT return system will then be disconnected meaning that the ONLY way to submit VAT returns is through the new system.

Please remember, VAT is only the first step in this whole digitalisation process. The decision you need to make is will Manager become MTD compliant or not. If not then every UK business currently using this great accounting system will be forced to change to something new. Here is the link to the HMRC site that list those suppliers who have undertaken to make their systems MTD complient by 1 April 2019. >> Here <<

Your clear statement of intent is urgently needed so we can make alternative arrangements so that we don’t fall foul of the HMRC.

Peter Storms

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Hi Lubos, All accounting systems intending to link to the HMRC system MUST be approved by them otherwise it will be rejected. In my post from UniqueAccounting I listed the link to VAT Notice 700/22. In there you will find all the requirements.

This is an urgent issue for all of your Manager users here in the UK. It will only affect those of us who are VAT registered because when VAT returns day happens in April 2019 we have got to be linked and tested and approved.

If the Manager system is not approved fairly quickly we will all have to find and install a completely new accounting system. In all likelyhood it will have to be Xero or Sage. Neither of which appeals to me.

Peter Storms

UPDATE: 27 September 2018

Private HMRC testing of accounting software is due to end soon. Then it will be open season chich is likely to overwhelm the tax people.

The bad news is that 01 April 2019 is D-Day for all VAT registered businesses because their next VAT return must be submitted within the new system.

There may, I say may, be a possible solution to this problem in Manager. If anyone is interested, please contact me.

Peter Storms

Hello mjgunn. Regarding your question about the difference between “Zero” and “Exempt” rated VAT I offer the following.
There are two types of taxable products or services for VAT purposes. The first is for those types of goods and services for which tax is due. The other is EXEMPTED from the VAT tax regime. In other words they are NOT taxable.

Those taxable products and services are broken down further into the various tax bands, much like income tax. Some incur tax at 20%, others at 5% and still others at 0%. They are still taxable products and services but just at different rates.
I hope that helps you.

Good point, well made, Tut, and I have done so. Thank you.
Now we just have to solve the bridging software challenge in six weeks and we are MTD compliant. Over to you, Lubos…