VAT in the United Kingdom

In the United Kingdom, Value Added Tax (VAT) is levied by the HMRC on the goods or services provided by registered businesses. If your business has a turnover of more than £85,000 it is mandatory for you to register for VAT.

Note: This section is applicable only for the customers in the UK Edition of Zoho Billing.

VAT Settings

Configure VAT in Zoho Billing

If your business is registered for VAT, you will be able to enter all your details and set up VAT in Zoho Billing. You can find all your details in the VAT Registration Certificate you’ve received from HMRC.

To configure VAT in Zoho Billing:

Navigate to Settings > Taxes & Compliance > Taxes > VAT Settings.
Select Yes if you are a registered business under Is your business registered for VAT?
Enter the Country Code and the 9 digit VAT Registration Number provided by the HMRC.
Select your VAT Accounting Basis. This can be:

Accrual Basis	VAT is calculated based on the Date of the Invoice.
Cash Basis	VAT is calculated based on the date your customers have made payments to you.

Mark Enable trade with contacts outside United Kingdom if you supply or import goods from other countries. Enabling this option handles the Reverse Charge Mechanism and Acquisition Tax in Zoho Billing. Learn More
Mark Enable trading of goods between Northern Ireland and the European Union (NI Protocol) if your business is located in Northern Ireland and you trade with businesses located in the EU.
Mark My business is registered for VAT MOSS if you are a registered supplier of digital services to EU Non VAT Registered Customers. Learn More
Mark Enable Domestic Reverse Charge in Sales transactions option to enable Domestic Reverse Charge (DRC) for your organisation.

Set up Flat Rate Scheme

Some eligible businesses, whose VAT taxable turnover is £150,000 or less (excluding VAT) can choose to join the VAT Flat Rate Scheme. Business owners registered for the this scheme pay only a fixed rate of VAT.

If your business is registered under the VAT Flat Rate Scheme:

Mark Use Flat Rate Scheme for VAT.
Enter the Flat Rate VAT based on your business type.
Select the date you rejoined the Flat Rate Scheme and enter the previous flat rate used under Flat rate for the pre-dated transactions.

Here is an example of how VAT is calculated normally vs the flat rate scheme:

Let’s say there are three items sold at £100 each. All three items carry a 20% VAT on them. Which makes the total sale value including taxes to £360. So the VAT paid will be:

Scheme	Calculation
Normal VAT	3 items of £100 each sold at 20% VAT Total sale value inclusive of VAT: £360 VAT: 20 + 20 + 20 = £60
Flat Rate VAT	3 items of £100 each sold at 20% VAT Total sale value inclusive of VAT: £360 Flat Rate = 14% VAT = 14% of 360 = £50.40

Note: VAT cannot be reclaimed if you have enabled the flat rate scheme.

VAT Deregistration

Deregistration is the process of cancelling your VAT registration if your organisation’s turnover is below £83,000 or if the organisation is no longer eligible for VAT according to the criteria set by HMRC (Her Majesty’s Revenue and Customs).

The Cancellation process in the HMRC Portal might take up to 3 weeks to process. Once the cancellation is done in the HMRC portal, you can deregister VAT in Zoho Billing. Here’s how:

Navigate to Settings > Taxes & Compliance > Taxes.
Select VAT Settings.
Click Deregister in the top right corner of the page.
In the following screen, set the VAT Deregistration Date on which you wish to deregister.
Click Deregister.

Your organisation will no longer be considered as a VAT-registered business after VAT has been deregistered.

Note: Once you create transactions after deregistering, you'll not be able to undo the deregistration. You will have to delete those transactions to undo deregistration.

To undo deregistration:

Navigate to Settings > Taxes & Compliance > Taxes.
Select VAT Settings from the sidebar.
Click Undo Deregister in the top right corner of the page.
In the pop-up window, select Undo Deregister.

Now, your previous VAT registration will be reinstated in Zoho Billing.

VAT Rates

This section lets you view and manage all the VAT Rates you’ll be using in your organisation. Apart from the default rates, you will be able to add new rates, edit existing ones and delete them based on your requirements.

Add New VAT Rate

To create or add a new VAT rate:

Navigate to Settings > Taxes & Compliance > Taxes > VAT Rates.
Click +New VAT and in the pop-up that appears:
- Enter the VAT Name.
- The VAT Rate(%).
Select EU Member State with whom you’re dealing if you have enabled VAT MOSS.
Click Save.

Edit VAT Rate

To edit an existing VAT rate, follow the steps below:

Navigate to Settings > Taxes & Compliance > Taxes > VAT Rates.
Hover over the existing VAT rates to and click Edit.
Edit the fields as desired in the pop-up that appears.
Click Save.
If a particular VAT rate has been applied already in some transactions, you can choose to update the new VAT rate in the draft transactions as well.

Delete VAT Rate

To delete an existing VAT rate:

Navigate to Settings > Taxes & Compliance > Taxes > VAT Rates.
Hover over the existing VAT rates to and click the trash icon.
Confirm the action by clicking OK in the screen that follows to delete a tax rate.

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