VAT Flat Rate Scheme... Can I use it? VAT Flat Rate Scheme... Can I use it?
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  1. #1

    Fingers like lightning


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    Default VAT Flat Rate Scheme... Can I use it?

    Just reading up on the flat rate scheme for VAT.

    I am currently registered for VAT, have been since 2009.

    My turnover should be below 150k next year, all of it next year should be IT contract based.

    I currently "invoice" an agency that uses self-billing.... so I never actually raise a VAT invoice.

    Am I able to use the flat rate scheme still?

    In my simple mind there appears to be a way to boost my profit by 5.5% by "charging" 20% VAT but only paying 14.5% VAT....

    I can't believe this is right... but thought I'd ask the question....

  2. #2

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    If you are VAT registered and your turnover is less than £150k then you can apply for flat rate. Assume you are already VAT registered, your agency will be raising VAT invoices anyway under the self billing scheme.

    If you are flat rate registered, the invoicing doesn't change. You would still charge 20% VAT. What you pay over to the VAT man is 14.5% of the gross invoice amount.

  3. #3

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    Quote Originally Posted by Craig@InTouch View Post
    If you are VAT registered and your turnover is less than £150k then you can apply for flat rate. Assume you are already VAT registered, your agency will be raising VAT invoices anyway under the self billing scheme.

    If you are flat rate registered, the invoicing doesn't change. You would still charge 20% VAT. What you pay over to the VAT man is 14.5% of the gross invoice amount.
    Ahhh... i see.... thought it couldnt be right...

    So if I invoice 100+VAT at present = 120
    I pay 20 VAT.

    Then I pay to HMRC 120*.145 = 17.4 instead of 20

    So not a great gain........

    Still, a few grand over the course of the year after Corp Tax....

  4. #4

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    Don't forget you will have to pay CT on the flat rate gain.

  5. #5

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    Quote Originally Posted by Craig@InTouch View Post
    Don't forget you will have to pay CT on the flat rate gain.
    yes I figured that in my calcs.....

    Are there any other issues that I need to consider?

    as Tesco say.. every little helps.... so for a few grand extra profit it might be worth it....


    Thanks.

  6. #6

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    I assume my VAT paid reduces the VAT payable as normal?

  7. #7

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    Quote Originally Posted by prozak View Post
    I assume my VAT paid reduces the VAT payable as normal?
    You can't claim the VAT back on your expenses as well under the flat rate scheme unless you are buying a single capital item over £2k.

    Another link for you HM Revenue & Customs: Flat Rate Scheme for VAT

  8. #8

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    Quote Originally Posted by prozak View Post
    I assume my VAT paid reduces the VAT payable as normal?
    No (unless its on a capital purchase over £2K), that's the whole point of the flat-rate scheme. The flat-rate surplus is designed to cover any input VAT you might have and is therefore designed for companies that do not make a lot of VATable purchases, simplifying the paperwork for those who can benefit.

    If the amount of input VAT you could claim exceeds the amount of FRS surplus you would accrue over the year, then you would lose out and should not join the FRS.

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