How to adjust boxes 6 and 7 of your VAT return
This article explains how to increase or decrease the amounts in boxes 6 and 7 in your VAT, whether you’re on the Flat Rate Scheme (FRS) or not.
In a VAT return, box 6 is for the value of your sales and box 7 is for purchases. The process of changing the amounts in boxes 6 and 7 is different, depending if you’re not on the Flat Rate Scheme or if you’re on the Flat Rate Scheme.
FreeAgent will accurately calculate all of these boxes for you, but there are some times when you might need to adjust the figure in box 6 or box 7 of your VAT return, without making changes to the figures FreeAgent has worked out for boxes 1-5.
Not on the Flat Rate Scheme
If you’re not on the Flat Rate Scheme, you’re able to increase or decrease figures in boxes 6 and 7.
Increase the box 6 figure
Using the scenario of increasing box 6 by £5,000.
Post two manual bank transactions and a pair of journal entries, all dated on the last date of the VAT quarter which you’re adjusting box 6 for.
The first manual bank transaction is a 'Money In' transaction to 'Sales', with 0% VAT, for £5,000 - the amount you’re increasing box 6 by.
The second bank transaction is 'Other Money Out' - 'Payment from Contra Account', for £5,000.
The journal entries are to debit category ‘001 Sales’ and credit '998 Contra Account', again with £5,000.
This will increase box 6 of your VAT return. The other entries to Sales, Contra and bank accounts will cancel each other out.
Decrease the box 6 figure
Using the scenario of decreasing box 6 by £5,000
Post two manual bank transactions and a pair of journal entries, all dated on the last date of the VAT quarter which you’re adjusting box 6 for.
The first manual bank transaction is a 'Money Out' transaction to a 'Sales Refund', with 0% VAT, for £5,000 - the amount you’re decreasing box 6 by.
The second bank transaction is 'Other Money In' - 'Receipt to Contra Account', for £5,000.
The journal entries are to credit category '001 Sales' and debit '998 Contra Account', again with £5,000.
This will decrease box 6 of your VAT return. The other entries to Sales, Contra and bank accounts will cancel each other out.
Increase the box 7 figure
Using the scenario of increasing box 7 by £5,000.
Post two manual bank transactions and a pair of journal entries, all dated on the last date of the VAT quarter which you’re adjusting box 7 for.
The first manual bank transaction is a 'Payment' to 'Sundries', with 0% VAT, for £5,000 - the amount you’re increasing box 7 by.
The second bank transaction is 'Other Money In' - 'Receipt to Contra Account', for £5,000.
The journal entries are to credit category '280 Sundries' and debit '998 Contra Account', again with £5,000.
This will increase box 7 of your VAT return. The other entries to the Sundries, Contra and bank accounts will cancel each other out.
Decrease the box 7 figure
Using the scenario of decreasing box 7 by £5,000.
Post two manual bank transactions and a pair of journal entries, all dated on the last date of the VAT quarter which you’re adjusting box 7 for.
The first manual bank transaction is to 'Refund' to 'Sundries', with 0% VAT, for £5,000 - the amount you’re decreasing box 7 by.
The second bank transaction is to 'Other Money Out' - 'Payment from Contra Account', for £5,000.
The journal entries are to debit category '280 Sundries' and credit '998 Contra Account', again with £5,000.
This will decrease box 7 of your VAT return. The other entries to the Sundries, Contra and bank accounts will cancel each other out.
On the Flat Rate Scheme
On the Flat Rate Scheme, you’re able to increase or decrease the figure in box 6 and box 7 is rarely used.
Increase the box 6 figure
Using the scenario of increasing box 6 by £5,000 and using a flat rate percentage of 14.5%.
Post two manual bank transactions and two pairs of journal entries, all dated on the last date of the VAT quarter which you’re adjusting box 6 for.
The first manual bank transaction is a 'Money In' transaction to 'Sales', with 0% VAT, for £5,000 - the amount you’re increasing box 6 by.
The second bank transaction is 'Other Money Out' - 'Payment from Contra Account', for £5,000.
The first pair of journal entries is to debit category '001 Sales' and credit '998 Contra Account', again with £5,000.
The second pair of journal entries is to debit category '819 VAT Charged' and credit '055 VAT Flat Rate Surplus', with £5,000 (the amount you're increasing box 6 by) x 14.5% (your flat rate percentage) = £725.
This will increase box 6 of your VAT return. The other entries to the Sales, Contra and bank accounts will cancel each other out.
When you post the first manual bank transaction, the second pair of journal entries removes the automatic adjustment FreeAgent makes to box 1.
Decrease the box 6 figure
Using the scenario of decreasing box 6 by £5,000 and using a flat rate percentage of 14.5%.
Post two manual bank transactions and two pairs of journal entries, all dated on the last date of the VAT quarter which you’re adjusting box 6 for.
The first manual bank transaction is a 'Money Out' transaction to 'Sales Refund', with 0% VAT, for £5,000 - the amount you’re decreasing box 6 by.
The second bank transaction is to 'Other Money In' - 'Receipt to Contra Account', for £5,000.
The first pair of journal entries is to credit category '001 Sales' and debit '998 Contra Account', again with £5,000.
The second pair of journal entries is to credit category '819 VAT Charged' and debit '055 VAT Flat Rate Surplus', with £5,000 (the amount you're decreasing box 6 by) x 14.5% (your flat rate percentage) = £725.
This will decrease box 6 of your VAT return. The other entries to the Sales, Contra and bank accounts will cancel each other out.
When you post the first manual bank transaction, the second pair of journal entries removes the automatic adjustment FreeAgent makes to box 1.
Decrease the box 7 figure for pre-registration costs
The only scenario when you're likely to need to amend the box 7 figure, is to decrease it for pre-registration costs that you're not claiming VAT on.
Using the scenario of decreasing box 7 by £5,000.
Post two manual bank transactions and a pair of journal entries, all dated on the day before your VAT registration date.
The first manual bank transaction is to 'Refund' to 'Sundries', with 0% VAT, for £5,000 - the amount you’re decreasing box 7 by.
The second bank transaction is to 'Other Money Out' - 'Payment from Contra Account', for £5,000.
The journal entries are to debit category '280 Sundries' and credit '998 Contra Account', again with £5,000.
This will decrease box 7 of your VAT return. The other entries to the Sundries, Contra and bank accounts will cancel each other out.
