Review a VAT return and calculation

This article explains how to review a VAT return that has been generated in FreeAgent and understand how the box figures are calculated.

Navigating to the relevant VAT return

Navigate to the 'Taxes' tab at the top of the screen and select 'VAT' from the drop-down menu.

You’ll be taken to your VAT ‘Statement of Account’ which shows how much VAT is due for each VAT return.

Bank transactions that you explain as VAT payments to HMRC or VAT refunds from HMRC will appear here. You'll see a running balance of how much is due to be paid to HMRC, or refunded to you from HMRC.

Select a specific VAT return using the ‘VAT’ drop-down menu in the top-left.

Alternatively, you can select a VAT return from the list.

Next, you’ll be taken to the VAT return for that period.

A warning will appear above the VAT return if you have any unexplained bank transactions in any business bank accounts in FreeAgent that would have an impact on this VAT period. You won't be able to file your VAT return until you have explained all the transactions in all your business bank accounts up until the end of the current VAT period. This may include hidden bank accounts.

Any bank transactions that are marked 'For approval' that have an impact on the VAT period will be automatically approved and updated to 'Explained' when you file (or mark as filed) the VAT return, so please ensure you have reviewed the transactions before filing.

Reviewing your VAT return

You can review a breakdown of the figures that FreeAgent has calculated for each of the boxes on your VAT return.

To do this, select the ‘Full Report’ tab at the top-left.

This will display all of the items (invoices, bills, expenses and/or bank transactions) that are included on the VAT return.

Tax rate

The ‘Tax rate’ column will display the VAT rate applied to the item (for example, 20%, 5% or 0%).

However, if an item is more complex or has more than one VAT rate applied to it, you may see one of the following descriptions:

• Deleted - if there is no VAT rate to display as item has been deleted
• Various - if there are multiple VAT rates associated with the item, for example, an invoice or bill containing line items with different VAT rates or an item that has been deferred
• FRS - if the VAT return is on the VAT Flat Rate Scheme
• Manual - if a custom VAT amount has been added to the item

Please note:

• The 'Tax rate' column is for information purposes only and does not affect the VAT calculation at all.
   
• If you're preparing your VAT returns on the cash basis, you won't see the ‘Tax rate’ column for now.
   
• If an invoice is created for a contact that is set to ‘Never’ charge VAT, the VAT rate will currently show as 0% rather than out of scope. Rest assured the amount of VAT due to/from HMRC will be correct and we’re working on a solution to display out of scope in this scenario.

If you see any items that you don't expect on your return, or if there are items that are followed by ‘Original item has been deleted’, then you may wish to review these items as they will be the result of additions or changes to items reported previously on an earlier filed VAT return.

If you're not seeing items that you would expect, this may be the result of the VAT scheme or VAT accounting basis (invoice or cash) that you're on as the scheme and basis will affect which calculations are performed and which items are included.

After a VAT return has been generated, but before it is filed, you can edit your VAT accounting basis or VAT Flat Rate Scheme details if these are not correct for the period you are filing. Changes to those details will likely have an impact on the items included on the VAT return so please do check with an accountant if you are unsure. If these changes would also apply to future-dated VAT returns that FreeAgent has already created, please make sure that you make the changes on those returns too.

For more information on the background calculations that FreeAgent uses to arrive at the figures on the VAT report, please see this HMRC Guidance.

To make changes to the period covered by a specific return, the VAT scheme used or the figures seen in boxes 6-9, please read how to edit your VAT return details.