VAT FRS calculation

[marcosscriven]

I've seen an awful lot of threads on here, and on Google, about FRS VAT. What I've not seen is the following general calculation, and I'm not sure why.

Taking the figures 17.5% normal rate, 12% on the FRS in the first year, and 13% thereafter, and a gross VAT taxable income of X:

0.175*X - (1.175 x 0.12)*X = 0.034 = 3.4% saved cashed (1st year)

0.175*X - (1.175 x 0.13)*X = 0.022 = 2.2% (2nd year onwards)

I've seen lots of individual calculations, but never seen anyone quote the 3.4% or 2.2% figures, as a way to just calculate the amount of extra taxable income you would make as a percentage of your gross.

So, if you gross 100k before VAT, then you know that you will get £3400 extra profit in your 1st year, and £2200 in your second, with just one simple multiplication.

The fact I've never seen that figure leads me to suggest it may be wrong... is it?

Thanks

Marcos

[malvolio]

It's not that complicated. You charge VAT on your invoices at the normal rate. Each quarter you pay 13% of your gross invoice value to the Revenueman. The balance stays in your bank account as profit, liable for CT as normal. There's no need to get hung up on inferred percentages, it is supposed to be as simple as possible.

Since VAT is never actually your money, there is no point in predicting it. If you work on the basis that 17.5% of your gross is not yours, you can't go wrong. Your sums are right, but meaningless, unless you aim is to withdraw as much as possible from the company all the time - which is a very dumb way to operate.

[marcosscriven]

It's not that complicated. You charge VAT on your invoices at the normal rate. Each quarter you pay 13% of your gross invoice value to the Revenueman. The balance stays in your bank account as profit, liable for CT as normal. There's no need to get hung up on inferred percentages, it is supposed to be as simple as possible.

Since VAT is never actually your money, there is no point in predicting it. If you work on the basis that 17.5% of your gross is not yours, you can't go wrong. Your sums are right, but meaningless, unless you aim is to withdraw as much as possible from the company all the time - which is a very dumb way to operate.

I don't suppose you are capable of writing a response on here without some sort of an insult; though 'dumb' is astonishly mild for you.

I was trying to find a way to get an *idea* of the figures involved. Of course there are many variables - of which this is just one. I figured it would be helpful to be able to simplify that calculation, to use, simply as a guide.

You clearly don't think so - and also clearly seem intent of being as negative and discouraging as any one could possibly be.

[Euro-commuter]

I don't suppose you are capable of writing a response on here without some sort of an insult; though 'dumb' is astonishly mild for you.

I was trying to find a way to get an *idea* of the figures involved. Of course there are many variables - of which this is just one. I figured it would be helpful to be able to simplify that calculation, to use, simply as a guide.

You clearly don't think so - and also clearly seem intent of being as negative and discouraging as any one could possibly be.

Give him a break, Mal. It's a reasonable question: how much will I save with FRS over normal?

The real answer is, a little but not a lot, but the real advantage is the simplicity. However, the question is legitimate.

[marcosscriven]

Give him a break, Mal. It's a reasonable question: how much will I save with FRS over normal?

The real answer is, a little but not a lot, but the real advantage is the simplicity. However, the question is legitimate.

Thanks for the rather more positive response Euro.

I wasn't even asking how to calculate it - rather offering my own take on calculating it simply. I have since found this link:

<removed>

They use 100k as their example too - and arrive at the same £3400 answer. But their way you need to do three or four arithmetic operations, rather than just one simple percentage.

£3400 extra profit is not at all insignificant in my eyes! That's a great holiday!

And how Mal can just say that it worthless, and pointless trying to predict it, I don't know.

I am well aware that VAT is the Governments money, but he seems to have failed to understand that the difference between what you charge your clients, and the amount you give to the Government, is *yours*.

Sure, it might not happen. Sure, customers might not pay up. But what's the big problem with forecasting? Getting an idea of things?

Crikey!

[malvolio]

OK, but -

Part of the problem is I don't use FRS at the mo, part of it is my PM background where I don't waste time worrying about things I can't effect, part of it is that it's not £3400, it's 80% of £3400 less any higher rate, part of it is it is all liable to change at the whim of some twonk in HMG at any moment so you only need to worry about the current financial period anyway. And I did answer the question - I usually do, if you look - just not in the way you expected. The idea is to make you (and others) think about things as much as anything.

As for bad temper and insults - this is Malvolio, I have an image to maintain you w*nker...

[Euro-commuter]

As for bad temper and insults - this is Malvolio, I have an image to maintain you w*nker...

[Lewis]

As for bad temper and insults - this is Malvolio, I have an image to maintain you w*nker...

I reckon Malvolio is a softy at heart He puts on this tough guy image but is actually very helpful most of the time.