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Using A2X with different VAT schemes
Using A2X with different VAT schemes

How to configure A2X for the VAT Flat Rate Scheme and the VAT margin scheme

Victoria Port avatar
Written by Victoria Port
Updated over a week ago

VAT Flat Rate Scheme

If you are using the VAT Flat Rate Scheme in the UK first you need to check you have the correct Flat Rate settings applied to your accounting software.

If you are using Xero their instructions on how to do it are HERE.

If you are using QuickBooks their instructions on how to do it are HERE.

When you use the Flat Rate Scheme, we can consider it more as an adjustment, as the amount is just being reduced at that final VAT submission stage. In your sales channel, as long as you have your settings correct, the sales will have been charged at 20% standard.

To comply with this you need to send the sales entries from A2X to your accounting software with that same 20% VAT for a standard sale. Later, because you are not claiming any expenses, your accounting software will make an adjustment on the VAT return submission to only pay your flat rate percentage to HMRC. So you just need to ensure any fees from the sales channels do not have a purchase VAT code on them.

VAT Margin Scheme

If you are using the VAT margin scheme in the UK, below is just one method of recording the data, and we recommend that you always get any adjustments checked over by your accountant before posting your sales data over to your accounting software.

  • First you need to decide how you will be handling the calculation of the journal entry to adjust for your VAT Margin Sales in your accounting software. A2X cannot make the calculation for you, so this needs to be done as a journal entry in your accounting software.

  • Next you need to configure your accounts and taxes mapping page in A2X so that you can account for the revenue at the correct percentage. Depending on how you've chosen to make your adjustment in your accounting software this is one method you could use.

  • If only some of your UK sales are subject to the VAT margin scheme and some UK sales are not, you will need to set up product type grouping so that we can identify the 2 groups of SKU's and split them out separately on the mapping page. To do this please follow the steps in this article. If all your UK sales are subject to the VAT margin scheme you can skip this step.

In Xero or QuickBoooks you have the ability to create your own tax rates. Many sellers choose to do this by creating one called VAT Margin Scheme that has a 0% rate attached to it. To do this click here for Xero or here for QuickBooks.

When you map your accounts and taxes page in A2X, you can then select your new VAT rate on the relevant revenue sections like this:

This will mean that you have all your sales tagged as VAT margin scheme on your VAT return but with no actual VAT on them. Your adjustment journal for the 16.67% difference between purchases and sales will then contain the actual VAT figure. You can read more about that calculation HERE.

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