If you're a small business and use the Flat Rate Scheme to simplify your VAT calculations, certain percentages are changing from 1 April 2022. This is to reflect the end of the reduced VAT rate for the hospitality, holiday accommodation and attractions sectors. You can find out which rates are changing on GOV.UK 

If your flat rate is affected, let's look at how you deal with this in your software. 

If your VAT period ends on 31 March 2022

If your VAT Return is monthly, or if it's quarterly and ends on 31 March 2022, it's a straightforward change.

1. Calculate and submit your VAT Return as normal for the period up to 31 March 2022.
2. Apply the new new Flat Rate in your software. To do this, click Settings, then Company Preferences, then VAT, update the Flat Rate, then click OK.

That's it. You can now continue to process and run your next VAT Return as normal.

If your VAT period spans 1 October 2021

If your VAT period spans the rate change, for example, if the period runs from 1 February to 30 April, there are some additional steps to ensure your VAT Return is correct for that period. Let's take a look.

 NOTE: This example is based on a quarterly VAT Return calculated from February to April. If you have a different VAT period, you'll need to adjust the dates accordingly.

1.  When you have entered all transactions up to and including 31/03/22, calculate your VAT Return, at the old rate, for the period 01/02/22 to 31/03/22.
2.  Record the calculated figures, but do not reconcile the VAT Return.
3.  Click the Benefit\Cost button and record the Benefit/Cost Amount, again do not reconcile the VAT Return.
4.  Apply the new new Flat Rate in your software. To do this, click Settings, then Company Preferences, then VAT, update the Flat Rate, then click OK
5.  After you've entered all of your transactions up to 30/04/22, run your VAT Return, at the new rate, for the period 01/04/22 to 30/04/22.
6.  Record the calculated figures, but do not reconcile the VAT Return.
7. Click the Benefit\Cost button and record the Benefit/Cost Amount, again do not reconcile the VAT Return.
8. Add the figures from the two VAT Returns together, we recommend that you record and retain these figures in a simple spreadsheet.
9. Calculate your VAT Return for the period 01/02/22 to 30/04/22.
10. Click Make adjustments and amend the calculated figures so that they match the totals in your spreadsheet.
11. Click Add Attachments and add your spreadsheet as evidence of your calculations.
12. Reconcile and submit your VAT Return in the normal manner.
13. In the VAT Transfer window, edit the Benefit/Cost amount to match the value of the sum of the cost/benefit from the two unreconciled VAT Returns, and complete the journal.
    You now need to reverse the manual adjustment value so that it affects your VAT Liability account.
14. Click Nominal Accounts, then click Journal reversal, locate and highlight the Manual adjustment journals and click Reverse, then click Save.

That's it. You can now continue to process and run your next VAT Return as normal.

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