Discussion
I've had something from my accountant about needing to choose whether to continue in the FRS scheme at a higher rate or leaving the scheme where I'll be better off but will have to claim VAT back.
Presumably a lot of others here are in the same boat. For a contractor invoicing monthly does it make much difference to submitting the return if outside the FRS? Interested in what others are choosing to do.
Presumably a lot of others here are in the same boat. For a contractor invoicing monthly does it make much difference to submitting the return if outside the FRS? Interested in what others are choosing to do.
This is what your accountant has contacted you about:
https://www.gov.uk/government/publications/tacklin...
If your expenses are less than 2% of turnover then you need to use the new 16.5% rate when paying VAT, if you're below the VAT threshold then it might be worth dropping out. If you're above, tough.
https://www.gov.uk/government/publications/tacklin...
If your expenses are less than 2% of turnover then you need to use the new 16.5% rate when paying VAT, if you're below the VAT threshold then it might be worth dropping out. If you're above, tough.
That's an interesting point.
Be aware, that there can be some complications caused by the transition from FRS to "Normal" VAT.
The rules governing what you do on leaving the FRS are listed in Section 12 and 15 of the FRS guide -
https://www.gov.uk/government/publications/vat-not...
Be aware, that there can be some complications caused by the transition from FRS to "Normal" VAT.
The rules governing what you do on leaving the FRS are listed in Section 12 and 15 of the FRS guide -
https://www.gov.uk/government/publications/vat-not...
Eric Mc said:
That's an interesting point.
Be aware, that there can be some complications caused by the transition from FRS to "Normal" VAT.
The rules governing what you do on leaving the FRS are listed in Section 12 and 15 of the FRS guide -
https://www.gov.uk/government/publications/vat-not...
Cheers - my accountant hasnt been able to answer it yet they are awaiting clarification from HMRCBe aware, that there can be some complications caused by the transition from FRS to "Normal" VAT.
The rules governing what you do on leaving the FRS are listed in Section 12 and 15 of the FRS guide -
https://www.gov.uk/government/publications/vat-not...
Almost without fail, most of the contractors I know are leaving the FRS scheme for two reasons.
1) The previous flat rate meant you got some VAT back and it was easier as you didn't have to deal with faffing around with VAT receipts\paperwork. The new increased rate effectively means you no longer get any VAT back so it's better to go on the standard scheme and at least get something back.
2) Most are also seeing it as a good way to get back at what is seen as an unfair attack on small businesses\contractors. I think the government were hoping that people would just accept the new rate, this is a way to show them that people aren't just going to roll over and take ill advised tax rises lying down. If enough people jump ship on FRS, their VAT take will actually go down meaning the rate rise will have achieved the exact opposite of what they intended.
1) The previous flat rate meant you got some VAT back and it was easier as you didn't have to deal with faffing around with VAT receipts\paperwork. The new increased rate effectively means you no longer get any VAT back so it's better to go on the standard scheme and at least get something back.
2) Most are also seeing it as a good way to get back at what is seen as an unfair attack on small businesses\contractors. I think the government were hoping that people would just accept the new rate, this is a way to show them that people aren't just going to roll over and take ill advised tax rises lying down. If enough people jump ship on FRS, their VAT take will actually go down meaning the rate rise will have achieved the exact opposite of what they intended.
There were two massive points about FRS and were the reasons the scheme was invented in the first place -
It made life easier from a paperwork point of view for smaller traders (that was the public explanation)
The REAL explanation was that HMRC were sacking thousands of VAT Officers and they needed to justify the sackings. They stated that most errors found by officers during VAT inspections of smaller VAT traders were minor and were mostly down to incorrect claims for Input VAT on costs.
By eliminating the reclaim of Input VAT on costs, they eliminated those types of erroneous returns,.. with fewer errors on returns, there was less reason for retaining staff to check and correct such errors.
Now of course, those errors will return but they won't have the staff to pick then up.
But then, the VAT return itself is being abolished in 2020 to be replaced by the 100% full disclosure Making Tax Digital transaction submission - so HMRC software will spot all there errors automatically - so who needs staff anyway
It made life easier from a paperwork point of view for smaller traders (that was the public explanation)
The REAL explanation was that HMRC were sacking thousands of VAT Officers and they needed to justify the sackings. They stated that most errors found by officers during VAT inspections of smaller VAT traders were minor and were mostly down to incorrect claims for Input VAT on costs.
By eliminating the reclaim of Input VAT on costs, they eliminated those types of erroneous returns,.. with fewer errors on returns, there was less reason for retaining staff to check and correct such errors.
Now of course, those errors will return but they won't have the staff to pick then up.
But then, the VAT return itself is being abolished in 2020 to be replaced by the 100% full disclosure Making Tax Digital transaction submission - so HMRC software will spot all there errors automatically - so who needs staff anyway
Eric Mc said:
But then, the VAT return itself is being abolished in 2020 to be replaced by the 100% full disclosure Making Tax Digital transaction submission - so HMRC software will spot all there errors automatically - so who needs staff anyway
Eric can you elaborate please - whats involvedNothing much to elaborate on.
Sometime in 2020, the VAT return we all know and love will no longer exist. By then, all trading entities (sole traders, partnerships, limited companies etc) will be up to speed and happilly submitting their Quarterly accounting data to HMRC using the sooper dooper (free in some cases) software directly to HMRC's computers.
The VAT return won't be needed because HMRC will be getting EVERYTHING about your business at least four times a years - including all the VAT data.
Isn't it wonderful.
I can't wait.
Sometime in 2020, the VAT return we all know and love will no longer exist. By then, all trading entities (sole traders, partnerships, limited companies etc) will be up to speed and happilly submitting their Quarterly accounting data to HMRC using the sooper dooper (free in some cases) software directly to HMRC's computers.
The VAT return won't be needed because HMRC will be getting EVERYTHING about your business at least four times a years - including all the VAT data.
Isn't it wonderful.
I can't wait.
Can you just spend enough on random business stuff (ink, paper, post-it notes...) to get your costs up to 2% of turnover, and therefore stay on FRS?
If the VAT spread is worth more than 2%, then you still end up ahead, without the tedious paperwork
...and you'll never have to scrounge another post-it in your life...
If the VAT spread is worth more than 2%, then you still end up ahead, without the tedious paperwork
...and you'll never have to scrounge another post-it in your life...
Eric Mc said:
Nothing much to elaborate on.
Sometime in 2020, the VAT return we all know and love will no longer exist. By then, all trading entities (sole traders, partnerships, limited companies etc) will be up to speed and happilly submitting their Quarterly accounting data to HMRC using the sooper dooper (free in some cases) software directly to HMRC's computers.
The VAT return won't be needed because HMRC will be getting EVERYTHING about your business at least four times a years - including all the VAT data.
Isn't it wonderful.
I can't wait.
Sounds like it'll reduce your workload massively.Sometime in 2020, the VAT return we all know and love will no longer exist. By then, all trading entities (sole traders, partnerships, limited companies etc) will be up to speed and happilly submitting their Quarterly accounting data to HMRC using the sooper dooper (free in some cases) software directly to HMRC's computers.
The VAT return won't be needed because HMRC will be getting EVERYTHING about your business at least four times a years - including all the VAT data.
Isn't it wonderful.
I can't wait.
Eric Mc said:
It may - or it may increase it massively - when HMRC realises the information they are getting every quarter is utter tripe.
They're not using the data in the short term. Quarterly reporting is being made mandatory to ensure businesses and individuals are keeping digital accounting records during the year. Small businesses that do shoeebox accounting are the main target here. The thinking being that fewer transactions will be missed if they are recorded timely rather than months later. Hence why calls from some quarters for thosebelow the VAT threshold to be exempt missed the point.PBSW5 said:
Can you just spend enough on random business stuff (ink, paper, post-it notes...) to get your costs up to 2% of turnover, and therefore stay on FRS?
If the VAT spread is worth more than 2%, then you still end up ahead, without the tedious paperwork
...and you'll never have to scrounge another post-it in your life...
No. Basically service costs, Transport cost and pretty much all costs associated with a service Company are not allowable. They need to be goods, they cant be gifts and they cant be Samples....They have to be things you sell as a principle purpose of your business. This is explained on HMRCs website.....I have looked, but Im not an accountant. My Accountant told me to come off the FRS...doesnt seem to be any way around itIf the VAT spread is worth more than 2%, then you still end up ahead, without the tedious paperwork
...and you'll never have to scrounge another post-it in your life...
ninja-lewis said:
They're not using the data in the short term. Quarterly reporting is being made mandatory to ensure businesses and individuals are keeping digital accounting records during the year. Small businesses that do shoeebox accounting are the main target here. The thinking being that fewer transactions will be missed if they are recorded timely rather than months later. Hence why calls from some quarters for thosebelow the VAT threshold to be exempt missed the point.
And it won't work. It will just mean that they will get four lots of poorly recorded information directly from the tax payer instead of one lot of decent figures from an accountant.Crippo said:
No. Basically service costs, Transport cost and pretty much all costs associated with a service Company are not allowable. They need to be goods, they cant be gifts and they cant be Samples....They have to be things you sell as a principle purpose of your business. This is explained on HMRCs website.....I have looked, but Im not an accountant. My Accountant told me to come off the FRS...doesnt seem to be any way around it
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