Finance - Preparing for a VAT Return

Preparing for a VAT Return

How to set up Easify for MTD

MTD will only apply if you are VAT registered and your turnover is over the VAT threshold – which is £85,000 as of April 2019. VAT thresholds do change regularly though so make sure you are familiar with the up to date threshold. If you’re voluntarily registered for VAT (i.e. your taxable turnover is under £85,000) you can still file your VAT via MTD but it’s not mandatory.

Step 1: VAT Settings & HMRC Authorisation

First of all you will need to go into Tools -> VAT Setting and make sure that the "My company is registered for VAT" is ticked.

In this window we have added quite a few new VAT Codes in line with MTD. These are:

  • ECG – EC Goods
  • ECS – EC Services
  • RCG – Reverse Charge Goods
  • RCS – Reverse Charge Services
  • RCM – Reverse Charge Mobile Phones and Computer Chips.

These are important if you sell or purchase goods within the EC or with the rest of the world. You cannot delete these VAT codes as they are necessary for the VAT returns to be generated correctly. Please speak to your accountant as to which ones you should be using if you’re unsure.

You will also need to enter the rest of your details in the fields at the bottom of this window:

Default VAT Rate

This will be S – Standard 20% for most UK businesses who charge VAT on their products or services.

Default VAT Calculation Mode

Whether you want Easify to calculate the VAT per item or per line. Calculating per item is ideal for the retail industry whereby a £10 item needs to cost £10 whether your customer purchases 1 of them or 1000 of them. However calculating the VAT per item does cause small VAT rounding issues. If you select the ‘per line’ calculation you’ll be less likely to get small VAT rounding issues, however due to the nature of VAT, rounding issues will occasionally occur under both methods.

VAT Reg. No.

You will need to add in your VAT Registration Number – this can be with the GB prefix or without it, however we recommend inserting your code with no spaces or hyphens etc.

VAT Scheme

Easify supports the 2 main VAT Accounting methods:

1: Standard VAT Accounting – where the VAT is due on the invoice or purchase date.
2: Cash VAT Accounting – where the VAT is due when the invoice or purchase is paid.

Most UK business use the Standard VAT Accounting model, however if your VAT taxable turnover is £1.35 million or less you can use the Cash accounting scheme. This helps prevent you from having a large VAT liability when you haven’t yet been paid for a job.

"Authorise for HMRC Making Tax Digital" button

This button will have a red cross next to it until you have setup Easify with HMRC. The steps to complete the setup are as follows:

  1. Click the "Authorise for HMRC Making Tax Digital" button

    This will open up a new web browser window on your computer:

  2. Click "Continue" at the bottom of this page
  3. Enter your HMRC Sign-in details and then click the "Sign In" button
  4. Click the "Grant Authority" button

    If successful, you will be redirected to a success message on the Easify website.

  5. Go back to Easify Pro and once Easify has finished the authentication, the ‘Authorise for HMRC Making Tax Digital’ button will show with a green tick

    Please note you will have to re-authorise this yearly and you can also re-authorise at any time by clicking this button. This is worth checking if you are having trouble submitting a VAT return and are not sure what the problem is.

    The authorisation process will time-out after a short period of time, so if Easify is showing as not authorised even when you have been through the HMRC process, then it's possible that it's timed out. You can re-authorise Easify as many times as you need to in order to complete this process.

  6. Click OK to save the changes

Step 2: Purchase Types

As certain purchase types (sometimes referred to as Nominal Codes) don’t appear on a VAT return such as wages, pensions, rates, etc you will have to make sure that your purchases types are set to be Vatable or not Vatable.

This is an important step – please do not skip this step as your VAT returns could be wrong.

Go to Tools Options Purchases Purchase Types. Here you will see that we have added a VATable column:

We’ve set some default purchase types as vatable or not vatable, however if you’ve added your own purchase types you will need to select whether they are vatable or not.

  • If the tickbox is ticked, it’s vatable
  • If the tickbox is not ticked it’s not vatable.
  • If there’s a black square in the tickbox it means you haven’t selected anything for this purchase type yet, so you will need to set this purchase type to be vatable or not vatable.

Anything that is marked as VAT rate O – Outside the Scope of VAT will be excluded from your VAT return.

More details of what is and what is not Vatable can be found on HMRC’s website or check with your accountant if you’re unsure.

NOTE – you will only have to complete Step 1 & 2 the first time you use Easify to generate your VAT return.

You’re now ready to start your first VAT return: Doing A VAT Return

Troubleshooting

If you receive an error message during HMRC Authorisation, please check:

  • You have entered your VAT Registration Number correctly in Easify
  • You have correctly setup your HMRC account

Another possible cause of the error message is that the web session has timed out on the HMRC portal which can happen if ,for instance, you have to leave your computer and then come back to it to later to complete the process.

You can restart the authorisation process from within Easify as many times as you like by clicking on this button again:

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