Hi, it would be useful to have a move-to-pot percentage that is useful for VAT purposes. At the moment I use the 20% amount to do this but this is wrong.
I bill client £8333.33 which, plus VAT, is £10,000.
£10,000 arrives in my account and 20% is put in VAT pot. So now I have £8000 in my business account and £2000 in my VAT pot. This is because £10,000 is 120% of the cost of the work, not 100%.
There needs to be a 16.6% option for easy VAT calculations. Or you’ll have a lot of people wondering where that £333.33 has gone…
It should be driven by a vat rate linked to a product code, eg
Product 1 “Clean windows” £10 vat rate linked 20%
Product 2 “Clear waste new build housing” £10 vat rate zero
Monzo be interested how you’d treat contractor to contractor payments subject to cis tax deductions at source. In effect only receipt of part invoice value is received balance goes direct to hmrc
It sounds like @andrewpclark is saying the current implementation of the Tax Pot does not calculate VAT correctly.
The current calculation is for tax at 20% is:
Amount moved to Tax Pot = Income * 0.20
But for VAT at 20% it needs to be:
Amount moved to Tax Pot = income * ( 1 - 1 / ( 1 + 0.20 ) )
I think the best solution for VAT and Tax Pots would be a mix of @mmccart1’s idea of using merchant codes with the addition that it’s possible to manually edit the VAT for a particular transaction then have any change deposited or withdrawn from the Tax Pot (this would require the VAT to be present in the transaction details screen).
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Cerberus
(There are no stupid questions, just stupid people.)
7
The tax pots is for income tax though not VAT last I kmew
This is the kind of equations I have in some excel sheets for tracking campaign budget spends and no matter how much I read them, I still can’t get my head around it at all.
Cerberus
(There are no stupid questions, just stupid people.)
9
I agree, this calculation is incorrect. 20% of the TOTAL invoice is currently transferred to the VAT Pot, which is incorrect, because the invoice total already includes 20% VAT. I turned the “Set money aside” option off because it is annoyingly incorrect.
Cerberus
(There are no stupid questions, just stupid people.)
17
I have a limited company. A limited company in the UK (where Monzo are based) does not pay “income tax”. It pays VAT (if VAT registered, which is based on turnover), and corporation tax on profits. I (and it seems others) saw this feature and assumed it was intended for VAT, because that is the only tax that is easy to set aside at a flat rate when an invoice (income) is received into the company account.
I think perhaps this feature wasn’t fully thought through, or tested on a small number of customers for feedback, before being made available. I enabled this feature when it became available, and was a bit confused at first that it was setting aside too much for each invoice payment I received. I turned it off and now manually transfer VAT into my VAT pot when I receive an invoice payment.
It seems a fairly small tweak to actually make this feature work for VAT in a way that I and others expect, and I hope to see that happen in the near future.
