Xero Vat Return - Advice please

[BellaCiao1]

Hi I do the accounts for my brother who is a self employed tradesman. Previously I had been doing them on spreadsheets and I found this very straight forward. Due to MTD I have set up Xero and have linked this to HMRC (haven't linked to bank account yet - the bank account is his personal one and finances are all entwined, he is currently setting up a separate business account).

There are a few VAT returns outstanding from the MYD was introduced back last year and due to a few reasons we are only getting around to it now - we are aware there are late claim penalties.

At the moment he uses his own invoice software and I record all bills/expenses on a spreadsheet and have kept all receipts. We are going to keep this method for the next few months just until we get time to switch everything else over to Xero.

I would really appreciate any advice on how to file for a VAT return on Xero - as in what is the least amount of information I have to upload (it's all from last year) and going forward I'll update it as I go.

I hope this makes sense to those in the know! Thank you

Basica

Also, the nature of the business is working on New Builds so there is no VAT to be paid for work done on them. It is only to lift VAT for money spent on items for work.

I can't help directly as I use QuickBooks but there's often very helpful YouTube tutorials so I bet there's the same for Xero

Thank You, I have watched a few tutorials hut they nearly seem to be too advanced for what I need.

Essentially, in layman's terms can I just upload my expenses and send this to HMRC and they can work out the VAT from that?

u use some software from Abratax which links to a spreadsheet - that might work for you?

The VAT return on Xero should work though. Have you run the report to see if it looks right?

Hi, I use Xero - you upload all your bills that you pay out onto Xero (or all receipts etc) and do all of your invoices through Xero - it will then calculate the vat return automatically- you can run reports before you submit to HMRC - it is incredibly easy!!!

No you can’t just upload your expenses and hmrc will work it out

You need to upload all the invoices / receipts into Xero to run the returns

if you want to do the old stuff on spreadsheets then you could use bridging software like Anna to catch up

I can get through to the part to make a VAT return and it tells me which ones I have that are outstanding. The figures are all 0.00 though as I haven't input any data yet.

I suppose I just need to know can I just input all my receipts and that'll work out the VAT?

Where do I input this info, is it under bills/expenses or under what do I record them.

I have tried to upload a couple, e.g. fuel £50 - I take a photo of the receipt, and approve it. Then I have to 'mark it as paid' and it shows up under bills.

Is this what I do for all of my receipts?

I don't have any invoices as none of the work he does has VAT as they are new builds.

Sorry I meant upload all my expenses up via receipt or inputting the ones I don't have receipts for e.g. things paid for by bank transfer.

You still need to upload income side but in VAT Columb set VAT to zero.
Expenses do as you are doing. Xero will then fill in VAT return and you just submit.

Thank you.

Does this mean when it comes to next year's and of year tax return this will be sufficient information?

You have to put the sales in too - even though they are zero-rated. They should go in the VAT return (entries in boxes 1 and 6).

You can enter the expenses as bills if you are using standard VAT accounting (ie the accruals method). That will get them into the VAT return. But if you’re on the cash basis you’d need to link the expenses to a payment, or enter them as ‘spend money’ transactions. You’d have to specify an account they were paid from then.

How are you dealing with the late returns? If you input your old transactions, Xero will pull them into the VAT return as late transactions (ie transactions from an earlier period) which you don’t want if you have to submit all your missed returns separately.

I think you might need to get an accountant!

Are you using xero properly? Create your sales invoices properly, with no VAT. Enter your expenses and purchase invoices properly, including the VAT. Run the VAT return for the period, and it will be correct.

Don’t use No VAT, it’s zero rated! (No VAT is for transactions that are outside the scope of VAT that don’t go on the VAT return at all, eg salary payments, pensions)

Put in all sales and purchase invoices for the quarter then it works it out for you

I was just going to go ahead and submit them as late returns and accept the fines (deducted from the VAT return I assume?)

I mean, how are you submitting them? if not through Xero then you need to make sure none of those transactions go into Xero (eg if you link his bank account and then put them in as expenses) otherwise Xero will pull them into thre next return (it will pick up any transactions that have been entered since the last submission, not just those dated in the period covered by the return).

Or you can put them into Xero but manually adjust the VAT return figures. That would mean you could use the Xero figures for your year end accounts.

There has been jo VAT claimed since Jan 2022 so there are 4 claims outstanding. I have all the information collated. The last year was very hectic so this went on the back burner.

His bank account isn't linked just his sort code and acc number but the actual account details aren't synced with Xero. Going forward I will do it as we go back dating it here is a PITA.

I just took pictures of all the expenses receipts for the first 1/4 to claim (Feb - April 22). I then analysed them, approved them and marked them as paid. I then went into review this tax return and none of it os showing in the little boxes that calculate he VAT. Everything just says 0.00 🤯

When you marked the expenses as paid did you use the correct dates of payment? Ie dated inbetween feb and apr 2022? And is the vat return you are reviewing definitely the April 2022 return? Are you set up to cash account for vat?

If all income and expenses on xero then yes accounts can be done from this for tax return

Oh this could be the reason why I marked it as paid today so it must have marked it as today's date. I'll go back in and edit the payment date to the date of the receipt.

The expenses part is confusing me a bit as I upload the receipt then I have to mark it as paid, then I get an alert saying 'BellaCiao1 £40 is on its way to you'.

If this is what happens then I'm on the right tracks. I will also ask him for the income to input.

Yes this will be the reason the vat return is not pulling the figures through. If you are cash accounting for vat everything is worked from the date of payment or receipt so all the expenses you've marked as paid today would appear on your return including April 2023.

It sounds like you have entered all the invoices via the expenses app and therefore Xero thinks that you have paid these costs personally so when you are marking them as paid Xero thinks a payment to reimburse you has been sent.

If you don't want to link the bank account - which you should, for ease of use, you will need to manually add the incomings and outgoings.

Basically it's just there to reconcile invoices paid, outgoings still to pay. So you'll have your balance sheet to show this has come in, this has gone out or this is due in, this is due out. Your balance sheet should match.

Have you done his chart of accounts on there? Do you know the various different VAT amounts for different things? You give them a code in the chart of accounts.

I love Xero. But it sounds like you are out of your depth.

Xero help is very good too. They gave a forum and either users will help or Xero themselves.

I think your brother is asking a lot of you here.

I always enter every salesnvoice manually, same with purchase invoices.

When linked to the bank account all you need to do is click a button to reconcile.

But you need to know the VAT for utilities, postage, bank charges etc...

If you can do all that on paper you should be fine just entering as one sum. I like to see it all though to correct any errors.