Flat rate scheme - bank interest

[jimbob12]

I've just been told by my accountant bank interest should be treated as income in the flat rate scheme.. and hes gonna adjust it for this liability for the last few years it wasnt paid. I dont mind paying fair tax but this just undermines that feeling of fairness and infact they are just out to screw ya.. UK tax and finance is a bloody joke..

[scooterscot]

Remind me what the FRS got to do with earned interest?

[djhns]

I think you have misunderstood your accountant.

They are generally two different things.

But yes, Bank interest must be treated as income and therefore taxable. However, you will know whether you have received the bank interest gross or net of tax by your 5 Apr bank statements in order to account for it correctly.

[Lewis]

This has been discussed before (sometimes to great length) also on Shout99 where an expert wrote to HMRC. The conclusion seems to be nobody can agree, including HMRC and the experts. As such I do what my accountants advise which is NOT to include bank interest in the Flat Rate VAT calculation.

[Lumiere]

At least you get some bank interest ! Its most likely to be zero these days ...

[krytonsheep]

Bank interest should be included in the flat rate VAT calculation.
HMRC did an update to notice 733 to make it clear (April 2009).

6.2 What must I include in my flat rate
turnover?
Your flat rate turnover is all the supplies your business makes, including VAT. This means all of the following:
• ......
• the value of exempt supplies, such as any rental income, bank interest on a business account or lottery commission.

[djhns]

Generally speaking, there shouldnt' be any VAT on bank interet income though.

So i suppose if there are any, then you must report that in your FRS.

[malvolio]

FRS is not concerned with VATable income but gross income from any source. That's how it works. If you want to use the traditonal methods of charging VAT on services and recovering VAT paid, then don't use FRS.

[PhilAtBFCA]

Bank Interest and Flat Rate Scheme

Bank Interest is an exempt supply for VAT purposes.

Exempt supplies are clearly part of your Flat Rate Turnover and the Flat rate % should be applied to it for calculating VAT.

Please see Our blog for the complete guidance.

krytonsheep:-
As a matter of interest the current Notice 733 is silent in para 6.2 on Bank Interest at this link, did you quote a printed guide ? If so does that mean that the current printed guidance is inconsistent with the web page ?

Phil

[ASB]

Bank Interest is an exempt supply for VAT purposes.

Exempt supplies are clearly part of your Flat Rate Turnover and the Flat rate % should be applied to it for calculating VAT.

Please see Our blog for the complete guidance.

krytonsheep:-
As a matter of interest the current Notice 733 is silent in para 6.2 on Bank Interest at this link, did you quote a printed guide ? If so does that mean that the current printed guidance is inconsistent with the web page ?

Phil

Out of interest, if the income were from a Foreign bank on a foreign held account then would that still need to be reported? I beleive that would strictly be outside the scope rather than exempt and then not need to be included in FRS turnover.