UK Flat Rate VAT - Calculate your VAT Return following the July 2020 VAT rate change for hospitality, holiday accommodation and attractions

In July 2020 some Flat Rate VAT Scheme percentages changed under the UK government's temporary VAT rate reductions for hospitality, holiday accommodation and attractions. Further guidance from HMRC can be found here >

NOTE: This article applies if your VAT flat rate has reduced but is not 0%. If you are in the hotel or accommodation sector and your VAT flat rate has reduced to 0%, please refer to our alternative guide.

To calculate your VAT Return for July 2020 accounting for the change in Flat Rates on July 15

NOTE: This example is based on a monthly VAT Return calculated for the month of July. If you have a quarterly VAT Return, you'll need to adjust the dates accordingly.

1.  When you have entered all transactions up to and including 14/07/2020, calculate your VAT Return, at the old rate, for the period 01/07/20 to 14/07/20.
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 July 31, run your VAT Return, at the new rate, for the period 15/07/20 to 31/07/20.
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 01/07/2020 to 31/07/2020.
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.

Video overview