VAT Schemes and Settings

Summary

The Tax & VAT regime settings tell Torqueflow how to work out the figures on your VAT Summary report. You record whether you are VAT registered, which accounting basis you use, which VAT scheme you are on, and the VAT period group HMRC assigned you. Torqueflow uses these to group and calculate the report. It does not file anything to HMRC.

These settings change how a report is calculated. They never change an invoice or a payment. Which options are right for your business depends on your circumstances, so confirm your choices with your accountant or against HMRC guidance. Torqueflow records what you tell it; it does not give tax advice.

Prerequisites

• You are signed in as an owner or a user with permission to manage pricing settings.
• Your business is VAT registered. If you are not VAT registered, leave VAT registered off and none of the scheme settings apply.
• You know your accounting basis, VAT scheme, and VAT period group. These come from your accountant, your VAT certificate, or your HMRC online account.

Steps

Open the Tax & VAT regime settings

1. Go to Settings > Pricing.
2. Find the Tax & VAT regime card. Its description reads “Configure VAT registration and how your VAT Summary report is calculated”.
3. Turn on VAT registered. The VAT number and regime controls appear once VAT is enabled.
4. Enter your VAT number in the format GB followed by 9 or 12 digits, for example GB123456789. A green tick appears when the format is valid.

Choose your accounting basis

The accounting basis sets whether the report counts VAT by invoice date or by when money moves.

1. In the Accounting basis control, pick one of two equal options:
   • Invoice (accrual). VAT is reported by invoice date. This is the standard basis and the default for every organisation.
   • Cash. VAT is reported when money is received or paid, not on the invoice date. This is the HMRC Cash Accounting Scheme.
2. Select Save. Changing the basis is reversible and only affects the report, so there is no confirmation step. A short line confirms the change and tells you to re-open the VAT Summary report to see the updated figures.

The help text notes cash accounting is eligible up to £1.35M turnover. Whether you qualify is a matter for you and your accountant. Torqueflow applies the basis you select; it does not check your eligibility.

Choose your VAT scheme

1. In the VAT scheme control, pick one of two options:
   • Standard VAT. You owe the VAT you charged, less the VAT you paid on purchases. Most businesses use this.
   • Flat Rate Scheme. You owe a fixed percentage of your VAT-inclusive turnover, and you cannot reclaim VAT on most purchases.
2. If you switch scheme, a confirmation dialog explains that the change alters how your VAT Summary works out what you owe, so totals you have already seen on screen may move. Reports you have already exported keep the figures they were saved with. Confirm to apply the change.

Set up the Flat Rate Scheme

These fields appear only when the VAT scheme is set to Flat Rate Scheme.

1. Enter Your flat rate. This is the percentage HMRC gave you for your sector. Torqueflow applies the percentage you set to your VAT-inclusive turnover to work out the VAT you owe. If you enter an unusually high figure, a note reminds you that most sector rates fall between 4% and 16.5%.
2. Answer the goods question if it applies to you. The checkbox reads “My yearly spend on goods (parts, oil, consumables) is under £1,000, or less than 2% of my turnover”. Ticking it sets your rate to 16.5%, the limited cost trader rate. HMRC re-tests this every VAT period, and it catches many labour-heavy garages. Use What counts as goods? to see what is included before you tick. If you are unsure, check with your accountant first.
3. Enter your VAT registration date to apply the first-year discount. Torqueflow reduces your rate by 1% for 12 months from the date you registered for VAT. When the discount is active, a line shows the date it runs until.
4. If you sell used vehicles under the VAT Margin Scheme, read the on-screen note. Margin-scheme sales are not covered by the Flat Rate Scheme and must be accounted for separately. Check with your accountant.

Record your VAT period group

HMRC assigns every VAT-registered business a period group. It sets which months your VAT quarters end in. Recording it lets Torqueflow line the report’s quarters up with the periods HMRC actually bills you on.

1. In the VAT period group control, pick the option that matches your VAT certificate or your HMRC online account. Each option is labelled by the months its quarters end in, for example “Quarters ending Mar, Jun, Sep, Dec”.
2. A confirmation dialog explains that changing the period group regroups every quarter in your VAT Summary, past and future, so totals you have already seen may move. Reports you have already exported keep the dates they were saved with. Confirm to apply the change.

Two things about input VAT that surprise people

The reclaim date is not always the invoice date. Where a purchase was recorded without its VAT invoice, the reclaim lands in the period the evidence was received, on both accrual and cash. That changes which quarter it appears in. There is no period lock, so attaching evidence to an old purchase can change a quarter you have already filed. See Purchases where the VAT invoice has not arrived yet.

Box 7 and Box 4 can cover different purchases. A purchase counts towards Box 7 in the period it was bought, and towards Box 4 in the period its VAT evidence arrived. So the two boxes are not two views of one set of invoices, and an effective VAT rate across them would describe neither. To see exactly which purchases are behind each figure, use Seeing the transactions behind your VAT figures.

Expected Outcome

• The Tax & VAT regime card holds your VAT registration, accounting basis, VAT scheme, flat rate details, and VAT period group.
• Your VAT Summary report is calculated on the basis, scheme, and period group you recorded, and the report stamps which regime it used.
• Changing a setting regroups or recalculates the report only. It never alters a saved invoice, quote, payment, or an exported report.

Troubleshooting

Problem	Cause	Fix
The scheme and regime controls are missing	VAT registered is turned off	Turn on VAT registered and enter your VAT number
A “Enter your flat rate percentage” message blocks saving	The scheme is Flat Rate but no rate is entered	Enter the flat rate HMRC gave you for your sector
A warning says your rate is below the 16.5% limited cost trader minimum	You set a rate under 16.5% but may be a limited cost trader	Confirm with your accountant whether the limited cost trader rate applies, and tick the goods question if it does
The first-year discount is not applied	No VAT registration date is recorded	Add your VAT registration date so the 1% discount can run for 12 months from that date
Your VAT Summary quarters end in the wrong months	The VAT period group is not set to your HMRC-assigned group	Set the correct VAT period group and re-open the report

Notes

• These settings only affect the VAT Summary report under Finance > Reports. See View and Export Financial Reports for how the report reads them.
• Torqueflow is a reporting tool. It does not file your VAT return or submit anything to HMRC.
• The cash-basis figure has limitations that are flagged on the report itself. It does not yet adjust for credit notes or refunds, and it does not handle hire-purchase or credit-sale invoices, invoices with payment terms of six months or more, advance invoices, or VAT Margin Scheme used-vehicle sales. If any of these apply, the figure may be overstated, so review it with your accountant.
• On the Flat Rate Scheme, your invoices still charge customers the normal rate of VAT. The flat rate only changes what the report says you owe HMRC. Setting the scheme does not change how invoices are produced.
• Managing the Tax & VAT regime needs permission to manage pricing settings, typically the Owner role.