VAT only invoice clarification

[Rackers]

Hi all.

I'm due to be paying my VAT return shortly and wanted some clarification.

I am on a flat rate VAT scheme.

My first four invoices did not have VAT on them which was an omission on my part. When I noticed I submitted a VAT only invoice to the company in question.

My question is on my VAT return from FreeAgent the same flat rate amount has been applied on all my invoices including the original ones that didn't have VAT on them (which is obviously fine). Looking at the FreeAgent report it looks like I'm being charged extra VAT on the VAT only invoice, is that correct due to how the flat rate scheme works?

Thanks

[northernladuk]

Would an accountant have spotted your omission and been able to answer this question?

Are you really sure the Flat Rate scheme is best for you now?

[TheCyclingProgrammer]

No it’s not correct, but more like a side effect of FreeAgent not really being designed to manage VAT only invoices by default. You should change the VAT rate to N/A.

Personally I would have issued a new invoice with the original amount plus VAT and a credit note for the original invoices, leaving just the VAT to pay.

[Lance]

If you have FreeAgent but no accountant then ask FreeAgent support.
If you have an accountant then ask them.

This is not an accounting question, this is an end user computer question.

[fidot]

Are you saying that Free Agent diesnt support vat cash accounting?

[TheCyclingProgrammer]

Are you saying that Free Agent diesnt support vat cash accounting?

It does support cash accounting.

[Maslins]

Hard to be 100% sure without seeing the actual data, but if I've understood correctly, I think FreeAgent is right.

Eg1 - you're on 16.5% limited cost trader rate, and raise an invoice for £1,000 + £200 VAT = £1,200. FRS shows 16.5% of £1,200 = £198.

Eg2 - same situation, except you mistakenly raised invoice 1 for £1,000 without VAT, then separate raised invoice 2 for £200, being 100% VAT. FRS shows 16.5% of £1,000 = £165, plus 16.5% of £200 = £33, total £198.

It is kinda important exactly how you entered the data onto FreeAgent though. Eg why wasn't VAT charged on the first few invoices? Had you not entered the VAT settings properly? Or possibly you had but manually changed the VAT rate on the invoice to 0%, or N/A? Or possibly you set the client as being international. Some situations would have lead to FreeAgent not making you pay FRS on the initial 4 invoices...so I'm guessing based on you saying it did.