Flat Rate VAT scheme

[Grinder]

Oh yes you guys are right.

So if I am not on flat rate scheme I would pay just the 15% of total that is £900.

In this case the difference between being on flat rate scheme and not being on it is:

£900 - £724.50 = £175.5 per month and for 11 months = £1930 profit

Hmmm I now wonder if its worth it for the first year, since I might need my own laptop for contracting (working on client site), maybe need also a printer and a new mobile phone and of course a license of MS Visual Studio software etc. It all depends if the hardware and software will be provided for me from the client or not. If it is provided then Flat rate is still a better deal I suppose.

P.S. Sorry I didn't now about it. I won't post anything serious in "general" anymore. But it seemed to me that the sub-forum "Light Relief" is meant for off-topic talk at first.

Based on those numbers, for each month you remain outside the scheme you need to spend £1345+ on gear you can reclaim VAT on, or you will be worse off.

[TykeMerc]

Oh yes you guys are right.

So if I am not on flat rate scheme I would pay just the 15% of total that is £900.

In this case the difference between being on flat rate scheme and not being on it is:

£900 - £724.50 = £175.5 per month and for 11 months = £1930 profit

Hmmm I now wonder if its worth it for the first year, since I might need my own laptop for contracting (working on client site), maybe need also a printer and a new mobile phone and of course a license of MS Visual Studio software etc. It all depends if the hardware and software will be provided for me from the client or not. If it is provided then Flat rate is still a better deal I suppose.

P.S. Sorry I didn't now about it. I won't post anything serious in "general" anymore. But it seemed to me that the sub-forum "Light Relief" is meant for off-topic talk at first.

We all had to start in business at one time or another, some of us rather a long time ago (18 years in my case) so some of us are rather jaded.
Plus there's a rash of sockpuppet trolls who try to stir up nonesense by posting idiot questions, try to bear with the scathing comments that some people post.

1. Once you VAT register you are obliged to charge VAT at the prevailing rate on the services or good you supply, at the moment that rate is 15%
2. Quotations and rates are almost always made EXCLUSIVE of VAT so to give a purely theoretical example of £100/day agreed rate for one days work you would invoice £100 x 1.15 = £115, the client will pay this and then reclaim the £15 in VAT against the VAT they have charged to one of their customers
3. If you do NOT go on the Fixed Rate Scheme then on all BUSINESS purchases you make on allowable items (there are some fairly complex rules on specific things including vehicle fuel) you total up all of the receipts, total the VAT you PAID and deduct that VAT total from the VAT you have charged and pay the difference to HMRC with your quarterly return. This can be a bit tiresome and takes some work, but is very sensible if your business has a lot of expenses such as stock, spares, consumables or machinery. Using the £100 invoice scenario
   1. You invoice £100 + £15 VAT = £115
   2. You buy items for £50+£7.50 VAT =£57.50
   3. You fill in your VAT return and VAT owing = Amount you collected in VAT - Amount you paid out in VAT = £7.50
   4. If you bought £150+VAT's worth of goods you would RECLAIM £7.50 from HMRC
4. The FRS does away with most of the tedious intensive tracking of receipts by assuming a flat rate of expenses typical to the type of business you register as. The net effect being that you charge 15% VAT on every invoice and then pay 11.5% of every invoice (without VAT) to HMRC. Back to the £100 invoice example.
   1. You invoice £100 + £15 VAT = £115
   2. You fill in your VAT return and pay £11.5 to HMRC
   3. You trouser £3.50, EVEN if you spent £50+VAT on business goods which would have meant that you would have paid HMRC £7.50 instead of £11.50
5. It's a swings and roundabouts game, if your expenses are relatively low compared to your income (you supply services rather than goods to any extent) the accepted wisdom is that the FRS is profitable. Incidentally HMRC set up the FRS to save us as businesses and them as a tax collector a lot of hassle so it's not a tax scam in any way.

The decision is obviously yours as a Business owner and it looks a bit intimidating at first dealing with HMRC, VAT returns and understanding the accountancy, but it's actually fairly simple when you get down to it.
Incidentally make sure whatever VAT approach you take that you set aside the VAT element as HMRC are not at all forgiving if you spend their money (yes you are a proxy tax collector when VAT registered and the money is NOT yours). HMRC Customs officials have very extensive and quite ancient powers of enforcement and they're entirely prepared to use them so keep on their good side which is easy to do.

It's rather late and I've had a couple of glasses of wine so I apologise in advance for any cockups in the above, also I'm a PM not an accountant so my advice is only worth what you paid for it

[houmie]

You can pick when you go onto the FRS, so buy all the hardware etc you need in the first couple of months of VAT registration, then go on the FRS.

Thats an interesting tip. And the hardware would still be expense able?

Nice one.

[Moscow Mule]

Thats an interesting tip. And the hardware would still be expense able?

Nice one.

Talk to your accountant. It's much easier if the company buys it directly from the company account.

[partimer]

VAT rate

I pop in here every recession and the advice is the usual: some good and some sarky.

I'm not sure how a lot of you are paying around 11 percent.

http://customs.hmrc.gov.uk/channelsP...345#P169_14547

Shows:

Computer and IT consultancy or data processing 13 percent
Computer repair services 11 percent


12 percent including the 1st year discount.
So how come none of you are in IT consultancy ?
Or have your accountants told you something we should all know ?

Aren't any of you worried that you may not be paying the right VAT ?
Just wondered ...

Should have posted in the business section.

[BolshieBastard]

As someone who had to use the cash accounting VAT scheme for years, I can tell you its a right pain in the arse to keep track of and complete the quarter VAT return.

Now I dont have many VAT purchases and expenses, I've applied for the VAT FRS from the start of my next VAT period ie 1 March 09.

Its a lot less hassle plus you get to trouser some cash off the taxman which cant be bad.

Unless you have a lot of VAT expenses, I'd advise anyone to switch to the FRS asap.

[BolshieBastard]

I pop in here every recession and the advice is the usual: some good and some sarky.

I'm not sure how a lot of you are paying around 11 percent.

http://customs.hmrc.gov.uk/channelsP...345#P169_14547

Shows:

Computer and IT consultancy or data processing 13 percent
Computer repair services 11 percent


12 percent including the 1st year discount.
So how come none of you are in IT consultancy ?
Or have your accountants told you something we should all know ?

Aren't any of you worried that you may not be paying the right VAT ?
Just wondered ...

Should have posted in the business section.

Nope. The HMRC site gives the 'old' VAT rates first. You have to scroll down the page for the rates applicable from December.

Surprised you didnt read it properly!

[partimer]

Could you do me a favour? I've got notice 733 as a hard copy stuck to my wall here.
I haven't bothered to check it on line. I just posted the link.

Could you cut and paste it here. It'll stop the discussion about 11.5. etc.
(Can't be bothered to do it myself on a Staurday)
Cheers.

Customs:
How come I didn't get a notification with my last VAT return ?
Aren't they legally suppose to ?

[Drewster]

Sorry to resurect this one - but I am confused (not least with the examples in this thread).

How do I calculate how much VAT to pay (if on flat rate scheme).

Option1 (No flat rate scheme)
Invoice = £100
VAT = £15

Complete VAT return and pay Hector £15

Option 2 (some examples in this thread)
Invoice = £100
VAT = £15

Calculate 11% of £115 = £12.65

Complete VAT return and pay Hector £12.65
£15-£12.65 = £2.35 kept in Company

Option 3 (a few examples in this thread)
Invoice = £100
VAT = £15

Calculate 11% of £100 = £11

Complete VAT return and pay Hector £11
£15-£11 = £4 kept in Company

I know I would prefer to pay £11 and keep the £4...
I know Hector would prefer I pay £12.65...

PS - I don't care (for the sake of this example) if the Flat Rate is actually 11% (1.5 or 13) - its just the calculation.

[Pinto]

I know I would prefer to pay £11 and keep the £4...
I know Hector would prefer I pay £12.65...

PS - I don't care (for the sake of this example) if the Flat Rate is actually 11% (1.5 or 13) - its just the calculation.

Option 3 is not valid.