Flat Rate VAT and Postponed Accounting

If you are on the flat rate VAT scheme, any imports purchased under postponed accounting now fall outside the turnover amount used to calculate the amount of VAT due. As of June 1st 2022 postponed accounting rules under the Flat Rate scheme will change, businesses will declare and recover postponed import VAT in the same VAT return, rather than including the net value of the purchase in the flat rate turnover calculation.

NOTE: The information in this article only applies if you are using a Flat Rate VAT Scheme. For information on postponed accounting for other VAT schemes please see this article instead. 

To ensure the value of imports purchased under postponed accounting are reported correctly, you'll need to manually adjust your VAT Return and remove the values from Box 6, then enter the correct values in boxes 1, 4 and 7. You can use the example at the bottom of this article as a guide.

Steps to process:

1. Prepare and calculate your VAT Return as usual.
2. On step 2, Reconcile VAT Return - Add adjustments as follows:
   1. Adjust the value of Box 1 and Box 6 to exclude VAT from any imports purchased under postponed accounting.
   2. Re-enter the correct values into Boxes 1, 4 and 7 (See example below).

 NOTE: When calculating the above values, include all applicable invoices and credits raised to your postponed accounting nominal code. 

Because a manual adjustment has been made to your VAT Return, you'll be prompted to upload an attachment as supporting evidence. We recommend you upload a spreadsheet or other document detailing the calculations you've completed to work out the correct amounts.

Example

Your business has a flat rate of 8%. You import goods worth £100 with 20% VAT.

Previously (transactions dated before 1st June 2022)

The net amount is recorded in Box 6. The VAT due is calculated from the total net amount in Box 6 multiplied by your VAT rate %.

VAT due is £100 x 8% = £8 (Box 5).

Now (transactions dated after 1st June 2022)

The net amount is to be recorded in Box 7 and not in Box 6.

The VAT amount is recorded in Box 1 and Box 4. 

VAT due is £8 (Box 1) - £8 (Box 4) = £0 (Box 5).

Next Steps

After adjusting the VAT Return, it can be submitted to HMRC as usual. We advise to keep records of any manual calculations in the event of HMRC requesting further information.