Initial VAT settings

When you first set up your business in FreeAgent, one important area to make sure you get right is the VAT.

OK, where do I start?

To set this up, go to Settings and choose VAT Registration.

I can't see it.

If you can't see this option, you don't have access to it, and you'll need to talk to your accountant or whoever set you up as a FreeAgent user.

I've clicked on it and it says I'm Not Registered.

By default all new businesses that are set up in FreeAgent are set up as not VAT registered.

I've applied for registration but HMRC haven't sent it through yet.

If you've applied for VAT registration for your business, choose Registration Applied For from the drop-down menu. Put in the date you expect to be registered from, so that FreeAgent will start adding VAT to the price of items on new invoices created with dates on or after that date, to make sure your customers pay you the full amount. You'd then need to come back here and change this setting to Registered once your registration comes through from HM Revenue, and re-issue the invoices.

My business is registered for VAT.

If your business is already registered, change this setting to Registered.

FreeAgent then gives you some more options to fill in.

Put in your VAT registration number. This is a compulsory field because your VAT registration number must be printed on your invoices.

Enter the date your business's VAT registration became effective. This again is important so that FreeAgent uses the correct dates for any pre-registration bills you incurred. 

Put in the date that your first VAT return period ended. This is the date of your initial (very first) VAT return, not the date of the first return you're going to prepare using FreeAgent.  FreeAgent will then date your next VAT return to finish 3 months after that date and so on.

Enter whether your business is invoice accounting for VAT or cash accounting for VAT. If you're on the VAT flat rate scheme and using the cash basis, then choose Cash. If you get this wrong, or change later, then don't worry, because you can change this setting on any VAT return.

If your business is using the VAT flat rate scheme, then choose which sector it's in. FreeAgent will work out the correct percentages including the discount for your first year of registration, so this is another reason why it's important to put in your VAT registration effective date.

If your business is accounting for VAT in the normal way, i.e. not flat rate, then choose Not on Flat Rate Scheme.

You will know if your business is using the flat rate scheme because you have to apply to HM Revenue to join this scheme, and be accepted, before you can use it.  This is different from registering for VAT or registering to use the VAT online filing service.

Again, you can change this setting on any VAT return later, if your business goes on or off the flat rate scheme or changes sector at a later date.

Once you've finished setting up your VAT, save your changes, or click Cancel if you want to exit this area without saving the changes.

What if I need to alter my VAT settings?

You can revisit this area to make changes later. But if you need to change the basis between invoice and cash, or change whether or not you're on the flat rate scheme, once you've entered transactions, don't do that here. Instead you'll need to do this on the individual VAT returns.

I've de-registered for VAT.

Here's how to handle that in FreeAgent.