How to do a VAT Return in Wave Online Accounting

In this post we’ll explain how to do a VAT return in Wave Accounting.

What is this free Wave Accounting?

Wave provide good free online accounting software. It’s paid for by small adverts at the side of the screen that you’ll hardly notice. Wave Accounting is a Canadian company who have built free accounting software mainly for Canada and the USA. But it can also be used in the UK and you can certainly work out what should go onto a VAT return in Wave. AS explained below, on anything other than the normal VAT scheme, you will need to adjust what is shown on the VAT return in Wave.

Accounting for VAT in Wave

VAT is a sales tax and that’s what it’s called in Wave Accounting. You’ll first need to set up your VAT rates by going to Settings (cog button), Sales Taxes, then Add a Sales Tax. See the image below for the settings you’ll need for the standard UK VAT rate at the time of publishing this post.

You may also need to set up other rates for your VAT return in Wave such as zero rate (0%) and the EC Reverse Charge rate which is explained below. Once you’ve set up the rates of VAT in Wave, you can then start adding or claiming VAT in Wave as follows:

Sales invoice and Bill: once you add a line to a sales invoice or bill in Wave, simply select the appropriate VAT rate. Wave will work out the VAT for you based on the percentage entered.

Transactions: add or select the income or expense in Transactions, then click on show details. The Taxes box will appear so you can select the appropriate VAT rate as shown below.

Running a Report for your VAT Return in Wave

The report you’ll need to do your VAT Return in Wave is the Sales Tax report. Just select the start and end dates for the period that your VAT return needs to cover then click on Update. Any transactions on which a VAT rate has been selected will appear in the report. The report is separated into a section for each VAT rate.

The summary report shows the totals and the audit report shows every transaction. The Payable columns are for income and sales (excluding VAT) and VAT on income and sales. The Receivable columns are for expenses and bills (excluding VAT) and VAT on expenses and bills. Then the difference between the two VAT amounts is the net VAT payable or receivable.

Normal Accruals VAT Return in Wave

The normal accrual basis VAT scheme is where you calculate and pay/claim VAT at 20% based on the date your customers are invoiced or the date you are billed. If you are on the normal accrual basis VAT scheme, you can use the VAT Return in Wave as it is.

Normal Cash VAT Return in Wave

The normal cash basis VAT scheme is where you calculate and pay/claim VAT at 20% based on the date your customers pay you or the date you pay suppliers. If you are on the normal cash basis VAT scheme, you need to adjust your VAT Return in Wave. You’ll need the Aged Receivables and Aged Payables reports both at the start and the end date of the VAT period. You’ll need to add to your VAT return the amounts on the aged receivables and aged payables reports at the start of the period, and deduct the amounts at the end of the period. The VAT amounts go in boxes 1 and 4, and the net amounts go in boxes 6 and 7.

Flat Rate Accruals VAT Return in Wave

Currently, calculating flat rate VAT in Wave isn’t possible. But you can easily find the VAT inclusive income amount you need by running a Sales Tax Report and adding the Payable amounts for before tax (net) and tax (VAT). Don’t forget that all income needs to be included in the flat rate scheme calculation, so you may want to use a ‘Zero’ rate or a ‘No VAT’ rate on income where VAT isn’t charged so that it appears in the report. Once you have your total VAT-inclusive income, just apply your flat rate percentage to calculate the VAT payable.

Flat Rate Cash VAT Return in Wave

Use the same workings for sales as shown above in Normal Cash VAT Return in Wave. Then add the net and VAT amounts, then apply your flat rate percentage to calculate the VAT payable.

Submitting your VAT Return

Currently, you can’t submit your VAT Return in Wave. So just like some other leading software, you have to log into your HMRC account and enter the amounts manually. However, if Making Tax Digital (MTD) for VAT applies to your business, you will have to submit your VAT return using MTD Bridging Software.

We can do your VAT Return in Wave for you

Our Quarterly package from just £44 plus VAT per month includes VAT returns as well as Accounts, Tax Returns, Management Accounts and general support and advice. Contact us for more details.