Corporation tax

[VillageContractor]

Hi all,

Really stupid question but do we pay corporation tax on the savings we make from FRS?

Invoice £120 including VAT - do pay corporation tax on £100 or £106?

Yes I've asked my accountant, but this is news to me

Thanks

VC

[Andy O]

Hi all,

Really stupid question but do we pay corporation tax on the savings we make from FRS?

Invoice £120 including VAT - do pay corporation tax on £100 or £106?

Yes I've asked my accountant, but this is news to me

Thanks

VC

Yes, the VAT earned as a result of FRS is considered as turnover so is included in the calculation for your profit, and You pay corporation tax on your profit.

[Michael at BI Accountancy]

Yes, the VAT earned as a result of FRS is considered as turnover so is included in the calculation for your profit, and You pay corporation tax on your profit.

What Andy said.

If you check your account's this should normally be split out in the turnover section, "Flat rate saving" or "Other income" etc.

[VillageContractor]

Feel kinda stupid stupid not knowing that.

Thanks guys

[DaveB]

What Andy said.

If you check your account's this should normally be split out in the turnover section, "Flat rate saving" or "Other income" etc.

Not disagreeing that CT is paid, but technically the FRS saving isn't income in its own right 's it? Being on the FRS means you pay less VAT so your remaining profits on which CT is paid are higher. There is no income stream to be identified as FRS etc. You deduct VAT paid and pay CT on whats left.

[AnotherGuy]

Not disagreeing that CT is paid, but technically the FRS saving isn't income in its own right 's it? Being on the FRS means you pay less VAT so your remaining profits on which CT is paid are higher. There is no income stream to be identified as FRS etc. You deduct VAT paid and pay CT on whats left.

In my FreeAgent P&L report, FRS is under "Other income" with account "055 Flat Rate Scheme Surplus"

[TheCyclingProgrammer]

Not disagreeing that CT is paid, but technically the FRS saving isn't income in its own right 's it? Being on the FRS means you pay less VAT so your remaining profits on which CT is paid are higher. There is no income stream to be identified as FRS etc. You deduct VAT paid and pay CT on whats left.

I'd say it's worth showing the surplus income from the FRS separately in your accounts as it distinguishes it from your net sales and if you also keep track of any input VAT you have paid over the year can also be used to analyse the profitability of being on the scheme.

[Darren at Fox-Bartfield]

FRS Suplus

I've seen some that do and some that don't within the accounts themselves. As the detailed P&L isn't part of the statutory section of the accounts, it's management information and can be tailored to suit. If you'd prefer it to be detailed out, then maybe worth asking the accountant to do so.

[VectraMan]

Not disagreeing that CT is paid, but technically the FRS saving isn't income in its own right 's it? Being on the FRS means you pay less VAT so your remaining profits on which CT is paid are higher. There is no income stream to be identified as FRS etc.

But it is directly related to the sale. No sale, no FRS income, so it's not really a separate income stream either.

I put it down as other income first, but then changed it to be part of turnover as someone here had said. It doesn't make any difference at the end of the day.

[Michael at BI Accountancy]

Not disagreeing that CT is paid, but technically the FRS saving isn't income in its own right 's it? Being on the FRS means you pay less VAT so your remaining profits on which CT is paid are higher. There is no income stream to be identified as FRS etc. You deduct VAT paid and pay CT on whats left.

Hi Dave,

I would agree that there is no requirement to show this in such a way. We (and the vast majority of accountants) simply display the information in such a way to show our client's the income generated by being on the flat rate scheme.