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VAT Flat Rate Tax v Standard

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    VAT Flat Rate Tax v Standard

    Can someone please explain what is meant by Standard Rate Tax, re VAT?

    Assume you earn £83.33 a day. VAT is charged at 20%, so in total, I would charge my clients 1.2 * £83.33 = £100.

    Under the Flat Rate Scheme, I pay 14.5% of £100 (ie £14.50) to HMRC, leaving me with £85.50, so a small profit of £85.50 - £83.33 = £1.17.

    How would it work under the Standard Rate Scheme?

    Thanks

    #2
    Originally posted by smileyface View Post
    Can someone please explain what is meant by Standard Rate Tax, re VAT?

    Assume you earn £83.33 a day. VAT is charged at 20%, so in total, I would charge my clients 1.2 * £83.33 = £100.

    Under the Flat Rate Scheme, I pay 14.5% of £100 (ie £14.50) to HMRC, leaving me with £85.50, so a small profit of £85.50 - £83.33 = £1.17.

    How would it work under the Standard Rate Scheme?

    Thanks
    £85.50 - £83.33 = £2.17, not £1.17

    Under the standard scheme, you pay all the VAT to HMRC, less the VAT on purchases. So you need to keep individual VAT receipts and work it out. The flat rate scheme simplifies admin.

    However, the FRS is changing from April - a new 'limited trader' rate of 16.5% will apply to nearly all of us - so on your £100 you will pay £16.50 to HMRC, leaving £83.50 - a 'profit' of just 17p which is unlikely to cover your actual VAT expenditure

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      #3
      I am in the process of cancelling my VAT after 4 years due to the Government changing the laws on the flat rate scheme from 14.5% to 16.5%.
      From what I am reading the government are going to be left with another black hole.

      Thanks
      Mark

      Comment


        #4
        Originally posted by teapot418 View Post
        £85.50 - £83.33 = £2.17, not £1.17

        Under the standard scheme, you pay all the VAT to HMRC, less the VAT on purchases. So you need to keep individual VAT receipts and work it out. The flat rate scheme simplifies admin.

        However, the FRS is changing from April - a new 'limited trader' rate of 16.5% will apply to nearly all of us - so on your £100 you will pay £16.50 to HMRC, leaving £83.50 - a 'profit' of just 17p which is unlikely to cover your actual VAT expenditure
        At present, I am on the FRS AND I keep all my expenditure receipts.

        Does that mean I'm receiving more than I ought to?

        Comment


          #5
          Originally posted by smileyface View Post
          At present, I am on the FRS AND I keep all my expenditure receipts.

          Does that mean I'm receiving more than I ought to?
          You need your receipts to claim expenses, which reduces your CT. If you are on FRS you can only claim for VAT on receipts for over £2000 including VAT.

          Comment


            #6
            Originally posted by smileyface View Post
            At present, I am on the FRS AND I keep all my expenditure receipts.

            Does that mean I'm receiving more than I ought to?
            Erm.. Pardon?
            'CUK forum personality of 2011 - Winner - Yes really!!!!

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