If you use a Flat Rate VAT scheme and post journals with a vatable tax code, the VAT Return calculates incorrectly.

For example:

• If the flat rate percentage is 6% and you post a bank receipt using the following journals:
  
  

  N/C	T/C	Debit	Credit
  4000	T1		100.00
  2200	T1		20.00
  1200	T9	120.00

  When you run a VAT Return, the VAT in Box 1 shows incorrect as £26.00 (20.00 + 6% of 100.00),  it should be £7.20 (6% of £120.00).

• If the flat rate percentage is 6% and you post a bank payment using the following journals:
  
  

  N/C	T/C	Debit	Credit
  5000	T1	100.00
  2201	T1	20.00
  1200	T9		120.00

  When you run a VAT Return, the VAT in Box 4 is incorrect as £20.00, but VAT reclaimed against T1 should be Nil under Flat Rate.

If you use a Flat Rate VAT scheme you should only post journals with a non-vatable tax code. For information about how to check your tax code settings, please refer to this article.

If you've already posted journals with a vatable tax code, please contact us.