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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 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 'Money-out' - 'Sales Refund', for £5,000 with 'Out of Scope' VAT.

This will increase box 6 of your VAT return. The other entries to Sales 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 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 'Money In' transaction to 'Sales', for £5,000 with 'Out of Scope' VAT.

This will decrease box 6 of your VAT return. The other entries to Sales 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 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 a 'Refund' to 'Sundries', for £5,000, with 'Out of Scope' VAT.

This will increase box 7 of your VAT return. The other entries to the Sundries 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 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 'Payment' to 'Sundries', for £5,000 with ‘Out of Scope’ VAT.

This will decrease box 7 of your VAT return. The other entries to the Sundries 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 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 'Money Out', 'Sales Refund', for £5,000 with ‘Out of Scope’ VAT.

The journal entries are 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 and bank accounts will cancel each other out.

When you post the first manual bank transaction, the journal entries remove 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 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 'Sales Refund', with 0% VAT, for £5,000 - the amount you’re decreasing box 6 by.

The second bank transaction is to 'Money In' - 'Sales', for £5,000 with ‘Out of Scope’ VAT.

The journal entries are 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 and bank accounts will cancel each other out.

When you post the first manual bank transaction, the journal entries remove 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 dated on the day before your VAT registration date.

The first manual bank transaction is a 'Refund' to 'Sundries', with 0% VAT, for £5,000 - the amount you’re decreasing box 7 by.

The second bank transaction is a 'Payment' to 'Sundries', for £5,000 with ‘Out of Scope’ VAT.

This will decrease box 7 of your VAT return. The other entries to the Sundries and bank accounts will cancel each other out.

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