How does Xero populate the Flat Rate VAT Return?

Xero follows the HMRC requirements for calculating VAT on the Flat Rate VAT Return. To view the transactions making up each total on the VAT Return, go to the VAT Audit Report.

If you use the standard VAT reporting scheme, see How does Xero populate the standard VAT Return?

For general information about how Xero accounts for VAT, see How does the VAT Return work?

Important information about the Flat Rate VAT Return

Transactions using the 'No VAT' tax rate are excluded from the VAT Return

Transaction amounts set to 'No VAT' won't be included in the VAT Return. Transactions that are 'No Tax' overall, and transactions that have line items set to 'No VAT', will still be listed on the VAT Audit report in the 'No VAT' section. You can use this as a useful reference when checking that all the transactions you expect to be included in your VAT Return totals have been correctly accounted for.

  • Whole transaction - Where all line items on a transaction are set to 'No VAT' the whole transaction will be excluded from the total sales/income and purchases/expenses figures on your return.
  • Line item - If 'No VAT' is used on one of many line items in a transaction, then just that portion of the transaction will be excluded.

Transactions that are 'No Tax' overall, and transactions that have line items set to 'No VAT', will still be listed on the VAT Audit report in the 'No VAT' section. You can use this as a useful reference when checking that all the transactions you expect to be included in your VAT Return totals have been correctly accounted for.

If you need a transaction to be reported on your return, but it doesn't have a VAT component, choose a tax rate that doesn't attract tax, for example, 'Zero Rated Income', 'Zero Rated Expenses'.

(Cash scheme) Transactions using certain tax rates are always included on the accruals basis

Transactions using following tax rates are always included in the Flat Rate VAT Return on the accruals basis as required by HMRC, even if you prepare your return under the cash scheme:

  • EC Acquisitions (20%)
  • EC Acquisitions (Zero Rated)
  • Your own tax rates with the tax type 'EC Acquisitions'
  • Reverse Charge Expenses (20%)
  • Your own tax rates with the tax type 'Reverse Charges'
  • Zero Rated EC Goods Income
  • Your own tax rates with the tax type 'EC Sales Goods'
  • Your own tax rates with the tax type 'EC Purchases'.

Box 1 - VAT on sales and other outputs

This box includes:

  • VAT calculated using the flat rate percentage on the VAT inclusive amount of all income transactions (including late claims, if you've chosen to include them) using the tax rates:

    • 20% (VAT on Income)
    • 5% (VAT on Income)
    • Zero Rated Income
    • Zero Rated EC Goods Income
    • Zero Rated EC Services
    • Exempt Income
    • Your own rates with the tax type ‘Sales’
  • VAT calculated using the flat rate percentage on the VAT inclusive amount of all transactions using the rate 'VAT on Capital Sales'.
  • VAT calculated using the flat rate percentage on the VAT inclusive amount of all transactions using your own tax rates with the tax type 'Capital Sales'.
  • The VAT portion of transactions with a tax rate using the tax type 'Reverse Charges'. Note that an offsetting amount is included in box 4, giving a net amount of 0.

Acquisitions from the EC are not included.

Box 2 - Standard Rate VAT on EC Acquisitions

This box includes the VAT portion at the standard rate of transactions using a tax rate with a tax type of:

  • 'EC Purchases'
  • 'EC Acquisitions'

Box 4 - VAT reclaimed on Capital Purchases

This box includes:

  • VAT calculated using the flat rate percentage on the VAT inclusive amount of transactions using the VAT on Capital Purchases tax rate.
  • VAT calculated using the flat rate percentage on the VAT inclusive amount of transactions using tax rates you've created with the tax type 'Capital Purchases'.
  • The VAT portion of transactions using a tax rate with the tax type 'Reverse Charges'. Note that an offsetting amount is included in box 1, giving a net amount of 0.

Box 6 - VAT inclusive value of sales and all other outputs

This box includes the VAT inclusive total of transactions using the following tax rates:

  • 20% (VAT on Income)
  • 5% (VAT on Income)
  • Zero Rated Income
  • Zero Rated EC Goods Income
  • Zero Rated EC Services
  • Exempt Income
  • Your own rates with the tax type 'EC Sales Goods'
  • Your own rates with the tax type 'EC Sales Services'

Plus the net amount of all transactions with tax rates using the 'Capital Sales' and 'Reverse Charges' tax types.

Box 7 - Total value of capital purchases excluding VAT

This box includes the VAT exclusive amounts of all transactions where the tax rate includes one of the following tax types:

  • 'Capital Purchases'
  • 'EC Purchases'
  • 'EC Acquisitions'
  • 'Reverse Charges'

Box 8 - EC supplies of goods excluding VAT

This box includes the VAT exclusive total of all transactions using tax rates with the tax type 'EC Sales Goods'.

Box 9 - EC acquisitions of goods excluding VAT

This box includes the VAT exclusive total of transactions where the tax rate uses one of the following tax types:

  • 'EC Purchases'
  • 'EC Acquisitions'