VAT Registration

**SueEllen** · 25 October 2010, 14:02

Do you have an accountant?

If not get one asap as they will be able to give you advice on this and other matters. Some accountants will do your VAT calculation for you.

Anything to do with VAT can easily be found by googling the words "HMRC VAT"

This is the first link I found - HM Revenue & Customs: VAT

Have a good read.

**Scrag Meister** · 25 October 2010, 14:31

There aren't many headaches. IANAA.

If you're services based you'll probably be better off on Flat Rate Scheme (FRS) means you can't reclaim VAT on purchases below a certain value something like 2k gross on one invoice.

If you sell hardware and other goods, invoicing /cash VAT will be your bag.

VAT is a non entity as far as your personal income goes, except for a small amount gained if on FRS.

You bill the VAT as a %age, currently 17.5% going up to 20% in Jan 2011, on top of your rate.

Then, if FRS, depending on your area of business pay a %age of gross invoice value to HMRC,
see Current Flat Rate %ages.
and Flat rates %ages after Jan 2011

The difference between VAT billed and the VAT paid goes into the company accounts as profit.

In cash/invoice accounting you pay the difference between VAT invoiced (services and goods) and Vat paid on purchases.

Hope my simpletons version wasn't too confusing.

As said before an accountant can help you with all of this.

**NorthWestPerm2Contr** · 25 October 2010, 14:56

Could somebody shed some light on this flat right thing? you said:

You bill the VAT as a %age, currently 17.5% going up to 20% in Jan 2011, on top of your rate.

How much is flat rate? and does that mean i bill for 20% + flat rate?

**northernladuk** · 25 October 2010, 17:12

I think Sue Ellen has given you some useful pointers... Might be worth reading them?

**Nixon Williams** · 25 October 2010, 17:26

Originally posted by NorthWestPerm2Contr View Post

Could somebody shed some light on this flat right thing? you said:

How much is flat rate? and does that mean i bill for 20% + flat rate?

VAT is a tax that is normally added to the value of your fees, currently the rate is set at 17.5%. So, if the invoice for your services is £2,000 you would add £350 (£2000 x 17.5%), making the total invoice £2,350.

The flat rate you apply depends upon what your business is, assuming that you are an IT contractor, the rate is currently 13%, so you pay over 13% of the gross invoice, ie £305.50.

This gives you a saving of £44.50.

If you join the Flat Rate scheme at the same time that you register for VAT, then you also have a 1% discount, so the rate would be 12%, so you would pay over £282.00 saving you £68.00

I hope this explains, but it might be wsie to find an accountant who can do all this for you.

Alan

**pcitshop** · 25 October 2010, 20:44

Flat rate VAT or not?

If one has bulk input expenses as standard rated then flat rate would possibly not be the best option. Flat rate is easy to manage , low admin cost and time to compile book, it should be worked out on individual client basis.

**Wanderer** · 25 October 2010, 22:16

Originally posted by NorthWestPerm2Contr View Post

I assume I have to inform the agency that I am now VAT registered and I have to start billing for VAT?

You add VAT to your invoice which will now have to include your VAT number and the amount of VAT as a separate item. You don't really have to inform your customers, they will get the message when they see your invoices.

Originally posted by NorthWestPerm2Contr View Post

How do I pay the VAT and what do I do with it?

HMRC send you a notice saying you have to submit a VAT return, this is done every 3 months. You pay the VAT through online banking, they will give you the sort code, account number and reference you need to use, your accountant will tell you how much to pay.

Originally posted by NorthWestPerm2Contr View Post

What benefits are there to VAT registration and what headache is there?

There is a bit more admin work to be done but your accountant deals with this.

Ask your accountant about the Flat Rate Scheme (FRS). It means you add VAT at 17.5% (soon to be 20%) and give (depending on your business) 13% of that to VAT man. Your company keeps the difference as profit, easy moneys! However, your company can't claim back the VAT on any thing you buy unless the invoice is over 2,000 pounds.

Your VAT registered customers don't care that you are now charging VAT as they claim it back.

**RichardCranium** · 26 October 2010, 05:26

Originally posted by Wanderer View Post

You don't really have to inform your customers, they will get the message when they see your invoices.

Your VAT registered customers don't care that you are now charging VAT as they claim it back.

FTFY

Regarding the Flat Rate Scheme (FRS), it seems almost all contractors benefit from being in it. However, I like to buy lots of 'toys' (PCs, netbooks, software, comfy office furniture, etc) that can legitimately be bought by the company, and buy expensive training. So my LtdCo has always been better off outside the FRS. My last accountant switched me to the FRS without telling me; thankfully the VAT people let me unwind that wrong decision without any penalty - my accountant thought I was mad so I had to show him he was wrong. But I am an oddity in that.

Of all the tax rules to learn, those around VAT are the easiest and most stable, and the VAT people are the most helpful. They are also the ones that can search your home and put you in prison. If you get your VAT calculations wrong, contact them and they will be all friendly and helpful and let you put it right in the next quarter and everyone is a happy bunny. Fail to pay your VAT because you spent it one something else and you will wish you'd never been born. Never spend the VAT money: unlike the other taxes the VAT is never yours or LtdCo's money - you merely collect it on behalf of the government.

**NorthWestPerm2Contr** · 26 October 2010, 08:07

So your telling me that the government gives you an extra 4 or 5% of your income with no strings attached?!

VAT Registration