Flat Rate VAT scheme Flat Rate VAT scheme
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  1. #1

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    Question Flat Rate VAT scheme

    Hello,

    I was reading at SDJ website about Flat rate VAT schema.

    How does that work for us as contractors with own Ltd?

    Can we charge our client a 15% VAT and keep the difference between flat rate VAT and the standard 15% for ourselves? Or is this only possible for good supplies?

    If the answer is yes, then how would we invoice the client? Let say the rate they offer is £300. Would I then invoice them £255 + 15% VAT = £300? Since I dont think the client would accept a £300 + 15% VAT.

    Thanks,

  2. #2

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    Oh dear.

    I'll let someone else take this.

  3. #3

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    Quote Originally Posted by houmie View Post
    Since I dont think the client would accept a £300 + 15% VAT.

    Thanks,
    That’s exactly what you do.
    Science isn't about why, it's about why not. You ask: why is so much of our science dangerous? I say: why not marry safe science if you love it so much. In fact, why not invent a special safety door that won't hit you in the butt on the way out, because you are fired. - Cave Johnson

  4. #4

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    Quote Originally Posted by houmie View Post
    Since I dont think the client would accept a £300 + 15% VAT.

    Thanks,
    Why ever not?
    ‎"See, you think I give a tulip. Wrong. In fact, while you talk, I'm thinking; How can I give less of a tulip? That's why I look interested."

  5. #5

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    I think the clue is in the name.

    Value Added Tax.

    HTH

  6. #6

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    Your ltd co adds VAT at the prevailing rate to its invocies. Then, assuming you are in your 1st year, you repay HMRC 10.5% of the total If beyond year 1, its 11.5%

    Eg.

    £300 p/d. 20 days per month = £6000.
    VAT @ 15% = £900
    Invoice total = £6900

    Your ltdco then owes 10.5% of £6900 to HMRC = £724.50. the rest is retained profit.

    "Keep them at 24,000"
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  7. #7

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    Quote Originally Posted by houmie View Post
    Hello,

    I was reading at SDJ website about Flat rate VAT schema.

    How does that work for us as contractors with own Ltd?

    Can we charge our client a 15% VAT and keep the difference between flat rate VAT and the standard 15% for ourselves? Or is this only possible for good supplies?

    If the answer is yes, then how would we invoice the client? Let say the rate they offer is £300. Would I then invoice them £255 + 15% VAT = £300? Since I dont think the client would accept a £300 + 15% VAT.

    Thanks,

    Generally speaking contractor rates are exclusive of VAT. Clients dont care are they recover the VAT anyway.

    Once you are registered for the FRS scheme you charge the normal rate of VAT on your invoices - £300 + VAT at 15% and pay HMRC VAT at the rate you registered for on the whole amount.

    e.g.

    Invoice for £300 + VAT @15% = £345

    Registered for FRS at 11%

    You pay HMRC 11% of £345 = £37.95

    £45 - £37.95 = £7.05 retained by your company.

    In return for this you cannot claim VAT back on normal business outgoings or capital expenditure below £2000.

    You also have to pay CT on the retained VAT at 21% at Co. year end as part of your normal profits.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

  8. #8

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    The client claims the VAT back so they don't care is the rate is 15% or 90%

  9. #9

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    Oh dear

  10. #10

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    Default Yes

    How would we invoice the client?

    You invoice the client exactly as you dow now e.g. £300+VAT=£345

    If you are in the 11% Category of the FRS, you pay HMRC
    345*0.11 = £37.95

    Your company keeps the difference, needs to pay Corp. Tax on it.

    Any interest your company makes from the company bank account is also subjected to Flat Rate VAT.

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