flat rate vat scheme thinghy
flat rate vat scheme thinghy
Author
Discussion

Lord Vladimir

Original Poster:

303 posts

223 months

Monday 7th April 2008
quotequote all
is there any disadvantage to going with the flat rate scheme if you have low expenses versus income?

thanks

Eric Mc

125,795 posts

295 months

Monday 7th April 2008
quotequote all
It depends on the Flat Rate % you need to use. This % is basded on the type of business you run.

ginettag27

7,146 posts

299 months

Monday 7th April 2008
quotequote all
This link might be of use.. http://customs.hmrc.gov.uk/channelsPortalWebApp/ch...

Does the extra one percent for the first year still apply to newly VAT registered companies?

Eric Mc

125,795 posts

295 months

Monday 7th April 2008
quotequote all
Yes.

Lord Vladimir

Original Poster:

303 posts

223 months

Monday 7th April 2008
quotequote all
ffffing typical IT consultancy is 13% frown

grumbledoak

32,571 posts

263 months

Monday 7th April 2008
quotequote all
13% of gross. It does simplify things a little, but it doesn't save you much, if any, money. And you get to pay VAT on any credit interest!

Eric Mc

125,795 posts

295 months

Monday 7th April 2008
quotequote all
How come?

Interest received is outside the scope of VAT and should never be included in any VAT Calculations - Flat Rate or otherwise.

grumbledoak

32,571 posts

263 months

Monday 7th April 2008
quotequote all
Bugger!

Eric Mc

125,795 posts

295 months

Monday 7th April 2008
quotequote all
Easy to correct - go back and look at the returns where you inadvertantly included interest received.
Add up the interest amounts included in error. Work out the VAT content of the interest.

When preparing your next return, deduct the total interest amount from your VAT Inclusive Outputs (Box 6 on the return). Deduct the VAT content from the VAT you are going to declare and pay over for this VAT return.

May I ask - why did you think interest received should be included?

Did your accountants not spot this?

grumbledoak

32,571 posts

263 months

Monday 7th April 2008
quotequote all
I just assumed 'gross income' would include it. And no, the accountants seem to have missed it. It won't be much, but I'll look into getting it back, just on principle.

Thanks. Amazing the stuff you can learn on a car site. Often about how dumb I've been. hehe

Eric Mc

125,795 posts

295 months

Monday 7th April 2008
quotequote all
The basic principles of what is VATable and what isn't remain exactly the same, whether you are calculating VAT on the Flat Rate Scheme or using the conventional method.

jardinec

392 posts

242 months

Monday 7th April 2008
quotequote all
I run an IT business and switched to the Flat rate scheme last year (13%) after working out that it will save around £600 per year. No much but when the calculations / accounts are all the same i'd sooner see it in my pockets than the big fella's

Easy to work out over say the previous year based on your returns..

Eric Mc

125,795 posts

295 months

Monday 7th April 2008
quotequote all
It is OK but there are a number of dangers inherent in the operation of the Flat Rate Scheme:

i) you MUST ensure you select the correct rate for your business. The definitions shown in the listings are a bit vague in some areas

ii) the Flat Rate may not be appropriate or easy to use if you carry out a number of different activities or sell different types of goods and services. This could be disastrous if the VAT people disagree with how you have arrived rate you are using.

iii) the VAT return itself is not worded correctly for Flat Rate users. Following the instructions on the return itself guarantees you complete an incorrect return.

ginettag27

7,146 posts

299 months

Tuesday 8th April 2008
quotequote all
Is it _still_ wrong??? That was a number of years ago now, surely they must have run out of all the old stationery by now??

Don't forget to take the extra 1% off if the business is newly registered.

Eric Mc

125,795 posts

295 months

Tuesday 8th April 2008
quotequote all
Still using the same stationery.

The stationery for VAT returns is the same for both Flat Rate and ordinary businesses. That is where the problem is.

They really need to create a totally different VAT return for Flat Rate traders to ensure they fill their returns in correctly.

ginettag27

7,146 posts

299 months

Tuesday 8th April 2008
quotequote all
I guess they don't have that many flat rate VAT business to warrant the cost (to them!) to re-print the forms or create a new one..

JustinP1

13,363 posts

260 months

Tuesday 8th April 2008
quotequote all
ginettag27 said:
I guess they don't have that many flat rate VAT business to warrant the cost (to them!) to re-print the forms or create a new one..
I guess they just can't be arsed. smile

ginettag27

7,146 posts

299 months

Tuesday 8th April 2008
quotequote all
JustinP1 said:
ginettag27 said:
I guess they don't have that many flat rate VAT business to warrant the cost (to them!) to re-print the forms or create a new one..
I guess they just can't be arsed. smile
in a nutshell... they probably had 20-30 meetings about it... focus group, initial design, costing, proposal, project start, christmas party and then couldn't be...


Olf

11,978 posts

248 months

Tuesday 8th April 2008
quotequote all
Eric, I'm very confused about a VAT issue. Basically I submitted some company expenses to an agency for some contract work, I am VAT registered. These expenses would be reimbursed to my company and then I would claim my out of pocket expenses back from my Co. Thats all fine, but the agency have paid the expenses back and applied a blanket VAT rate. I.e. the expenses were for 100 pounds. They've paid me 117.50. This can't be right surely. Not least of all because some of the expenses were incurred overseas.

I've spoken to the agent and the not so clever contact there said 'computer says' and 'computer adds' so I'm no wiser there.

What do you reckon?

Eric Mc

125,795 posts

295 months

Tuesday 8th April 2008
quotequote all
Whatever you charge your customers, you should charge VAT on that bill. It doesn't matter if the bill you submitted to your customer is your normal fee or is an attempt by you to recover costs incurred by you.

Even if the cost you wish to recover from your customer did not have VAT on it when you incurred it ( foreign expenditure, rail fares, postage etc) the fact that YOUR business is VAT registered means that YOU need to charge VAT on the bills you submit to recover those costs.

Therefore, if you wanted to "reclaim" a train fare of £100 from your client, you would need to raise a sales invoice for £100.00 plus £17.50 VAT.

Please note that employees claim expenses. Businesses charge their customers.

Have you spoken to your accountant about this issue?


Edited by Eric Mc on Tuesday 8th April 21:59