Flat Rate VAT - Think Accountant Is Wrong

[joey122]

I asked them to double check and they said I was wrong.

Suppose this

Company earns 10K and bills for 10K + VAT(@15%) == 11.5K

VAT at 10.5% is payable on the 11.5K AND NOT on the 10k

To me this smells wrong

Anyone else know for sure??

[Waldorf]

The Flat rate vat is paid on the gross invoice, so assuming the % rate is right, then the calculations looks correct.

[BolshieBastard]

If you are an IT Contractor, the FRS VAT amount is 11.5% on £11.5k unless you are in your co's first 12 months of existence in which case a 1% discount is applied to make 10.5%. The FRS percentage is applied to the total income including VAT so your accountant is wrong.

Get a signed declaration from them they'll pay your fine if investigated by HMRC!

A lot of people are playing fast and loose regarding the FRS VAT percentage and operating on a percentage of less than 11.5% even where the discount isnt applicable.

Up to them but if they get investigated by HMRC...............................

[grey_lady]

Looks right if you're in your first 12 months and on the 10.5% rate.

BTW If there is an error your accountant should pick it up at your year end and as long its under a certain amount, £2k i think - then you can just send them a cheque for the difference, or ask for a refund if its in your favour - anything over that I think they investigate more carefully.

[jmo21]

If you are an IT Contractor, the FRS VAT amount is 11.5% on £11.5k unless you are in your co's first 12 months of existence in which case a 1% discount is applied to make 10.5%. The FRS percentage is applied to the total income including VAT so your accountant is wrong.

Get a signed declaration from them they'll pay your fine if investigated by HMRC!

A lot of people are playing fast and loose regarding the FRS VAT percentage and operating on a percentage of less than 11.5% even where the discount isnt applicable.

Up to them but if they get investigated by HMRC...............................

erm....?

[stillooking]

Looks right if you're in your first 12 months and on the 10.5% rate.

BTW If there is an error your accountant should pick it up at your year end and as long its under a certain amount, £2k i think - then you can just send them a cheque for the difference, or ask for a refund if its in your favour - anything over that I think they investigate more carefully.

I continued to apply the discounted rate after the 12 mths, the accountant didn't pick it up and HMRC came round, did a check and found that I'd underpaid... They asked for money which was rather annoying. It's a common mistake, but HMRC don't remind you,so am assuming it's a bit of job creation by civil servants (force of darkness).

Also noticed that the current flat rate doesn't suit my company spend and I don't make a bean on the vat difference.

[ctdctd]

erm....?

WHS

Whoever said the FRS VAT payable is (in OP's case) = 11K5 x 10.5% is correct!

[joey122]

WHS

Whoever said the FRS VAT payable is (in OP's case) = 11K5 x 10.5% is correct!

So you are paying VAT on the VAT payment received???

This is crazy. My income was 10K and I charged VAT on this 10K.

I do not understand how HMRC are expecting me to pay VAT On 11.5K

This is almost VAT on VAT

[Maslins]

This is almost VAT on VAT

Yup, but dey's da rulez.

Same with stamp duty on VATable commercial property. Buy a property for £1m, add VAT on, then pay stamp duty at 4% on the VAT inclusive price of £1.15m even if you're able to reclaim the VAT at a later date. Go figure.

[thunderlizard]

So you are paying VAT on the VAT payment received???

This is crazy. My income was 10K and I charged VAT on this 10K.

I do not understand how HMRC are expecting me to pay VAT On 11.5K

This is almost VAT on VAT

You make a sale £10,000 + VAT@15% = £11,500.

You have to pay 10.5% of the £11, 500 to customs, i.e. £1207.50

So of the £1500 VAT the government kindly allowed you to stick on top of your bill, you only have to pass on £1207.50 and the remaining £292.50 goes in your company's back pocket to help with your expenses. What's so crazy about that?

Example here if you still don't believe your accountant:
http://www.hmrc.gov.uk/manuals/bimmanual/bim31585.htm