Flat Rate VAT Tax Return

[dagenheis]

Hi,

My FRS VAT return is due this month for the period ending 31-Jul-2011. I have gone through HMRC guidelines to submit the information in each box on the online form; it seems to be straightforward.

However, I am wondering about the calculation of my gross turnover so that I can apply discounted percentage to calculate the amount payable to HMRC.

Should I include the payments received until 31-July (May-July) for calculation of the gross turnover? Alternatively I can use the total amount from the invoices I have issued until 31st July. I don't know which approach is right.

e.g. In total I have recieved 5000 GBP (VAT inclusive) from the agency into my bank account. But I have submitted invoices for 7000 GBP (VAT inclusive) and I should get the payment for those 2 additional invoices in next 2 weeks (after 31st July). Hope it makes sense.

Also, how does the process work - The accountant can submit VAT return on my behalf and then I make a payment to HMRC or I should make a payment first.

Many thanks,

[kingcook]

If you want to pay your VAT based on the date the invoice is paid, this is called the Cash Accounting Scheme.

But seeing as you're on FRS, you cannot use Cash Accounting. Therefore, you'll have to pay the VAT based on invoice dates (yes -- this could mean that you pay the VAT on an invoice, before the invoice has actually been paid, e.g. slow payers).

[kingcook]

To be a bit more specific...

You have invoiced £7000 inc VAT for the period May-Jul, so your VAT should show sales of £7000

Assuming your FRS rate is 13.5%, you pay £7000 * 0.135 = £945

[Lumiere]

the flat rate scheme has its own cash based method that is very similar to the cash accounting scheme.

9.1 How do I use the cash based turnover method?

Apply the flat rate percentage to the VAT inclusive supplies for which you have been paid in the accounting period.

HM Revenue & Customs

that's how most of FRS registered contractors operate I guess

[SueEllen]

If you want to pay your VAT based on the date the invoice is paid, this is called the Cash Accounting Scheme.

But seeing as you're on FRS, you cannot use Cash Accounting. Therefore, you'll have to pay the VAT based on invoice dates (yes -- this could mean that you pay the VAT on an invoice, before the invoice has actually been paid, e.g. slow payers).

Nope.

As already stated the FRS has it's own cash accounting method. People get confused about this and some accountants don't like you doing it as it's easier for them if you do it on the taxpoint date.

Anyway you apply your FRS VAT percentage to the total amount received i.e. £5000

The accountant can do your VAT calculations and submit the return online for you. However they are very simple to do so it's worth doing it yourself.

Once you have submitted the return you need to pay HMRC the amount of VAT due which you can do with a debit card online on the VAT website. I would do it asap to avoid forgetting and getting a warning letter from HMRC.

You can also set up a direct debit now for the third time you want to pay VAT.

[Lumiere]

..some accountants don't like you doing it as it's easier for them if you do it on the taxpoint date.

Out of curiosity, how does it affect accountants if you use the cash method? (just want to make sure that mine is doing the rest properly)

[eek]

Out of curiosity, how does it affect accountants if you use the cash method? (just want to make sure that mine is doing the rest properly)

Accountants keep a better track of invoices than cash balances.

[dagenheis]

Thanks everyone

I have gone through the HMRC notice (733) on their website as well. In a nut shell, we can use cash-based turnover method if the company turnover is below certain limit (1.5M i think).

So I am going to use this and this method may reduce our liability in case of bad debts.

It is interesting that the accountant did ask about filing the return on the basis of issued invoices and I mentioned about using cash based method instead :-)