I'm just starting to review the year together for my main company, which is a property owner/ developer, and I've got a VAT query.
Rental properties are exempt from VAT, for both sales and purchases wholly relating to the rental. However, when you have something that is already 0 rated, should I be marking it down as 0 rated or exempt? I'm working on Xero, but I don't think that should make a difference.
As an aside, if there are any Xero experts around, does anyone know of a way to get it to cope with a company that has it's rentals on an exempt rate, development activities on 20% rate, overheads apportioned according to income, and regularly takes advantage of the de minimis ruling? At the moment I'm having to use Xero for tracking and invoicing, and then manually calculate the VAT return as it can't handle it. My Xero advisor at the accountants says no can do, but that is going to cause issues for MTD, so I'd rather get it sorted for the next financial year if possible.
Zero rated is one thing, exempt is another entirely so it does make a difference. I do not use that software but if it does not work for what you need then change to something else.
Yes, I'm aware they are completely different things, but both are valid in this case. For example, buying a carpet and having it fitted. Carpet co. is VAT registered, but we are exempt, so cannot claim back the VAT- marked as exempt on Xero.
Carpet fitter is not VAT registered, so no VAT anyway- mark as exempt or mark as 0 rated? Is there any that takes precedence over the other?
The company is actually several related companies, and I do all of the accounts, so Xero as a whole works very well for us, it's just the one company VAT return that doesn't.
I would expect you would need to export your VAT data into an Excel file, do the Partial Exemption calculation; create a Journal, to post back into Xero. You retain the xl file with your VAT Return.
I would suspect the point Casu was making is that the zero smeero rubbish is well just that - rubbish. Why on earth it doesnt allow both I dont know when such is very common and pretty well bog standard in this green land of ours. I have quite a few clients who deal with mixed VAT codings and manage it well enough on other software. But I suppose if it work wells for your others then its a workaround jobbie for the one, as Les suggests.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I would expect you would need to export your VAT data into an Excel file, do the Partial Exemption calculation; create a Journal, to post back into Xero. You retain the xl file with your VAT Return.
I would suspect the point Casu was making is that the zero smeero rubbish is well just that - rubbish. Why on earth it doesnt allow both I dont know when such is very common and pretty well bog standard in this green land of ours. I have quite a few clients who deal with mixed VAT codings and manage it well enough on other software. But I suppose if it work wells for your others then its a workaround jobbie for the one, as Les suggests.
I actually get on quite well with Xero in general, and it works well for this company- it was purely using Excel before so it's all a step up. And I find it so much more user friendly than Sage- everyone's different!
But I agree, it should be able to handle this, and I'll try on the work around.
Any ideas on whether I should be Zero rating or Exempt rating?
Yes, as an example, the carpet fitters invoice. He is not VAT registered (as are a fair amount of our suppliers, use lots of local trades).
I am leaning towards it being exempt rather than 0 rated... in the course of buying the carpets (Standard rated) the exempt rated overrules the standard rated. By that logic, the exempt rated should also overrule the 0 rated, surely?
I know it doesn't make any difference to the actual figures, I just don't like not knowing!
If you charge the tenant for carpet fitting, as something seperate to the rent, it is standard rated.
If the carpet is included in the rent, and you do not re-charge, then it is all exempt.
Does that include what you do?
If you charge the tenant for carpet fitting, as something seperate to the rent, it is standard rated. If the carpet is included in the rent, and you do not re-charge, then it is all exempt. Does that include what you do?
Hi Les,
It's not the charging on that's the issue (we would charge VAT for that), it's the invoice we receive and pay from the carpet fitter. If I receive an invoice with no VAT on it, and I enter it on the system, do I select no VAT or Exempt VAT on the drop down box?
It's only coming about as this is the first year of using Xero, and I'm reviewing the chart of accounts. When they are set up, it asks you to choose the standard VAT rate for each nominal code. I had automatically set all to do with rental as exempt, but there are a couple of nominal codes that are automatically set and locked to zero rated. It made me wonder if I had chosen the right standard rate for the rest of the codes.
I would need to enter £24 total cost, VAT rate exempt, as I can't claim that back for a rental property.
Carpet fitter is £20, no VAT as he is not registered.
Do I key the invoice as £20 cost, VAT rate exempt, or £20, VAT rate 0?
They both give me the same outcome, but I want to know if one takes preference over the other.
There was an interesting discussion on this recently in regard to non vat invoices http://forum.bookkeepers.network/t64104957/cis-sage/ I think it boils down to how you would have treated it if he had been VAT reg. If you can claim the VAT then zero rated and if you can't then exempt, although it wouldn't really matter if you treated it as exempt even if you could claim the VAT back.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
A purchase from an unregistered supplier has to be included in Box 7 of the VAT Return. Choose the VAT code that includes the cost in Box 7. (whether it is zero or exempt is irrelevant for a purchase.)
A purchase from an unregistered supplier has to be included in Box 7 of the VAT Return. Choose the VAT code that includes the cost in Box 7. (whether it is zero or exempt is irrelevant for a purchase.)
I think they both do (I'll double check later, but fairly certain). Thanks!
I would need to enter £24 total cost, VAT rate exempt, as I can't claim that back for a rental property.
Carpet fitter is £20, no VAT as he is not registered.
Do I key the invoice as £20 cost, VAT rate exempt, or £20, VAT rate 0?
They both give me the same outcome, but I want to know if one takes preference over the other.
There was an interesting discussion on this recently in regard to non vat invoices http://forum.bookkeepers.network/t64104957/cis-sage/ I think it boils down to how you would have treated it if he had been VAT reg. If you can claim the VAT then zero rated and if you can't then exempt, although it wouldn't really matter if you treated it as exempt even if you could claim the VAT back.
This follows my logic, so I think this is how I will treat it. If he was VAT reg, then it would be exempt, even though he is not VAT reg, we are still exempt, so I shall exempt supply everything I can.
There was an interesting discussion on this recently in regard to non vat invoices http://forum.bookkeepers.network/t64104957/cis-sage/ I think it boils down to how you would have treated it if he had been VAT reg. If you can claim the VAT then zero rated and if you can't then exempt, although it wouldn't really matter if you treated it as exempt even if you could claim the VAT back.
Thanks for adding John - I went out and got drunk!!!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
