VAT on Xero

VAT on XERO 

XERO is an accounting software but with a very special feature where it can calculate your VAT return and file it directly with HMRC without leaving the software.

How it works

You can access the VAT overview if you've switched to Xero's MTD VAT return. The VAT overview links to HMRC, and updates when you or another user opens it for the first time during the day.

From the overview, you can:

·        See the VAT payments you need to make, or refunds you’re due

·        Review and file MTD VAT returns

·        View past MTD VAT returns, and download VAT receipts for your records

To open the overview:

1.      In the Accounting menu, select Reports.

2.      Find and open the UK VAT Return.

3.      (Optional) To include a summary of your VAT information on your main Xero dashboard, select View summary on dashboard.

You need the adviser or standard (with view reports) user role to access your VAT information.

Your secure connection to HMRC

When you set up MTD for VAT, it allows HMRC to send information to your Xero account. It also lets you send returns to HMRC.

Both you and your accountant can set up a connection to HMRC, and access your MTD VAT returns. You can connect using your Government Gateway ID and your accountant can connect using their agent services account.

You can remove the authorisation you’ve given Xero to connect with HMRC (HMRC website). If you remove the authorisation, you need to set up MTD for VAT again before you can file VAT returns from Xero.

Sections on the VAT overview

If you've set up MTD for VAT, you’ll see three sections on your VAT overview:

·        VAT information from HMRC

·        Needs attention

·        Filed

If you haven't set up a connection for MTD for VAT, for example because only your accountant needs full access, you'll only see filed returns.

VAT information from HMRC

VAT amount due/refundable – shows the current total due to HMRC. This balance might include amounts from previous periods or advance payments and is downloaded from HMRC daily.

Payment due – shows you when your next payment is due. If you pay your VAT bill by direct debit (HMRC website), HMRC sets the date to take payment from your account. You can click on View previous payments to see the payments HMRC has recorded for you. Contact HMRC if you have queries about the payments.

Payment method – shows how HMRC expects you to make payment. For example, direct debit or direct credit will show if you've set up these arrangements with HMRC. If you don’t have a payment method set up, this field shows as Not supplied by HMRC.

Needs attention

This section shows the VAT periods that HMRC want you to file returns for. Xero lists VAT periods when they become available on the first day of the new period.

To open the VAT return for a period, click Review. You can review the details for any VAT period listed, but you can only file a return for the earliest period.

You can’t file a return before the return period has ended, nor file a return for a custom period. However, you can view transactions for a custom period.

Filed

This section shows all past returns filed with MTD for VAT – whether you filed them through Xero or outside of Xero (eg using another software provider).

The VAT amount due or refundable for each return also displays. This is a historical amount and, unlike the value in the VAT information from HMRC section, doesn't reflect any payments you’ve made.

To open a filed VAT return, click View. If the return was filed from Xero, you can then click Download VAT receipt to download a PDF receipt for your records.

In Conclusion

XERO has made it easy and quick to prepare and file return. It also incorporates all the different accounting schemes saving hours of time, in addition to being more accurate. However, setting this up and VAT planning is something that still requires a human touch. This is where Cheylesmore Accountants comes in to help the client with