VAT .... flat rate or not?

[skelm]

Hi,

Just to clarify some doubts on the whole VAT thing ....

I have been told about flat rate .... which I was told that in a nutshell means I add 17.5% to my invoice but only pay 12% of the gross. So say on a 1K invoice i will charge 175 for VAT but pay 141. Is this right? Does this mean I dnt get VAT back on my expenses though ( trains, mileage, parking )?

Whats the benefit of not going flat rate if my expenses will really only be transportation ( mileage, tube, train, parking, )?? Prob maybe 700-1000/month?

Then there is also a 67K limit to not register for VAT. I assume it means i dnt charge VAT and i dnt get any back from expenses??

[Nixon Williams]

Assuming you will be using the flat rate of 12% (the rates differ depending upon what business you are in) then as you state, on a gross invoice of £1175 you would pay over £141 to HMRC.

Points to note:

1. For the first 12 months from VAT registration you have a further 1% discount, so if your rate was 12%, for the first 12 months you would only pay over 11% of the gross.

2. VAT cannot be reclaimed on expenses, other than single capital assets that cost at least £2000 (inc. VAT).

3. Generally there is little or no VAT to reclaim on travel costs, so it is unlikely that you would lose out here.

4. Whilst the threshold for compulsory VAT registration is £67,000 - you can register if you are below this level.

We would generally recommend that a new business does register for VAT and for the Flat Rate scheme - the typical annual saving tends to be £2-3,000 in year 1.

Alan

[skelm]

Ok thanks for that.

What happens while I wait for the VAT reg to be processed and I need to invoice client?

E.g if I have a £1000 invoice ( excl VAT ), do I invoice for £1000 and the later pay the VAT( i.e lose out a bitby paying VAT out of own pocket ), or do I invoice for £1175 then later on pay the VAT?



Thanks

[ctdctd]

You invoice ex VAT and put "VAT registration pending" on the invoice.
When you get your VAT number you send a 2nd invoice for the VAT.
Don't invoice any VAT before your registration is confirmed.

HTH