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VAT Flat Rate Scheme Update

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    #31
    Originally posted by pr1 View Post
    'trouble' for "me" or more work for my accountant?
    Well, the latter...but hopefully you've got a relationship where you work together rather than each trying to make the other's life more awkward In practice the likes of FreeAgent won't cope with it, so someone's going to have to do some manual calculations.

    Originally posted by MarkT View Post
    So buying stuff on eEbay isn't a goer, even if it's significant?

    I can make a good 10% profit on apple products, why can't I use my ltd company to do that?
    I think you'd be cutting off your nose to spite your face. Remember you need to be charging the end client VAT, much of which you pay over, yet you're not reclaiming VAT on the purchase. So simple example:
    - you buy it for £100+VAT = £120
    - you sell it for £110+VAT (your 10% profit) = £132

    You can't reclaim VAT on the purchase, so real cost to you is £120. However, you're paying over (say) 14.5% on your gross sales price, so of the £132 you pay over £19.14, leaving you with £112.86.

    Therefore the end result of you reselling products with a 10% "profit" is you getting £112.86 from a cost of £120, so a loss after VAT is considered of £7.14.

    There may be some really quirky way you can just about do that enough and find that the loss on it is slightly outweighed by the gain on then being able to use your "normal" FRS rate (rather than the 16.5% one)...but I think you're into really convoluted territory for most likely negligible gain.

    Comment


      #32
      Originally posted by MarkT View Post
      Fair question

      I perform PMO services, not project management, not exclusively to any specific industry either. I don't manage projects and I work in IT, Business, Defence and other industries.

      My plan B is selling Apple products that I can make 10% on, it's hopefully going to grow as I get bigger discounts for buying bulk.
      It's almost certainly worthwhile doing the limited cost trader test imo. There are provisions for businesses which straddle two different classes.

      4.8 Businesses that fits into more than one sector
      If your business includes supplies in 2 or more sectors, you must apply the percentage appropriate to your main business activity as measured by turnover. If the limited cost business rate applies you must use this rate, see paragraph 4.4. Choose the sector for which your business gets the greater part of its turnover. Don’t split your turnover, or apply more than one percentage.

      Example:
      If a taxi business does some car repairs, it will have to decide which of the two activities will generate the larger amount of turnover and apply the appropriate flat rate percentage to the whole of its VAT inclusive turnover.

      If the taxi part of the business and the car repair part of the business the business
      expects to generate turnover of £40,000 (including VAT) in the next year expects to generate turnover (including VAT) of £15,000 in the next year should apply the flat rate percentage for a taxi business to the total VAT inclusive turnover for both parts of the business.

      Comment


        #33
        Originally posted by Maslins View Post
        Well, the latter...but hopefully you've got a relationship where you work together rather than each trying to make the other's life more awkward In practice the likes of FreeAgent won't cope with it, so someone's going to have to do some manual calculations.



        I think you'd be cutting off your nose to spite your face. Remember you need to be charging the end client VAT, much of which you pay over, yet you're not reclaiming VAT on the purchase. So simple example:
        - you buy it for £100+VAT = £120
        - you sell it for £110+VAT (your 10% profit) = £132

        You can't reclaim VAT on the purchase, so real cost to you is £120. However, you're paying over (say) 14.5% on your gross sales price, so of the £132 you pay over £19.14, leaving you with £112.86.

        Therefore the end result of you reselling products with a 10% "profit" is you getting £112.86 from a cost of £120, so a loss after VAT is considered of £7.14.

        There may be some really quirky way you can just about do that enough and find that the loss on it is slightly outweighed by the gain on then being able to use your "normal" FRS rate (rather than the 16.5% one)...but I think you're into really convoluted territory for most likely negligible gain.
        Thanks for for long reply - my 10% includes the VAT, so I make 10% including it. I'm on a 12% rate and pass the VAT FRS test that is suggested below for my business.

        My only questions were really - what if I don't sell everything I buy, does that have an impact? But mostly will I fall foul of
        "goods you will resell or hire out unless this is your main business activity" as I won't make this my main business for a few years....most of my income will still come from my normal line of work.

        Comment


          #34
          Originally posted by Alan @ BroomeAffinity View Post
          It's almost certainly worthwhile doing the limited cost trader test imo. There are provisions for businesses which straddle two different classes.
          Thanks Alan - I believe it would stay the same - 12%.

          Comment


            #35
            Originally posted by MarkT View Post
            Fair question

            I perform PMO services, not project management, not exclusively to any specific industry either. I don't manage projects and I work in IT, Business, Defence and other industries.

            My plan B is selling Apple products that I can make 10% on, it's hopefully going to grow as I get bigger discounts for buying bulk.
            you're not OTHER then. You're clearly a 14.5% rate business.
            If I were you I'd quietly switch to normal VAT this month and hope they don't notice you've been taking the p**s.
            Last edited by Lance; 1 March 2017, 16:57.
            See You Next Tuesday

            Comment


              #36
              Originally posted by MarkT View Post
              Thanks Alan - I believe it would stay the same - 12%.
              I believe you're wrong but not knowing the extent of your other activities I can't be 100%

              Comment


                #37
                Originally posted by Lance View Post
                you're not OTHER then. You're clearly a 14.5% rate business.
                If I were you I'd quietly switch to normal VAT this month and hope they don't notice you've been taking the p**s.
                Hardly. I took advice on this from my accountant and IPSE, who I am a member of, as far as my activities are concerned, I am not a Management Consultant and I don't work in IT. Currently I am working in Insurance, previously I have worked at BaE, GSK and various other places. None have been in IT.

                Comment


                  #38
                  Originally posted by Alan @ BroomeAffinity View Post
                  I believe you're wrong but not knowing the extent of your other activities I can't be 100%
                  Why would I be wrong? Happy to be corrected, but as I say below, I've taken some advice on this and feel I am doing right by the classification on my activities.

                  Would the other activities mean I was not "other"?

                  Comment


                    #39
                    Originally posted by MarkT View Post
                    Why would I be wrong? Happy to be corrected, but as I say below, I've taken some advice on this and feel I am doing right by the classification on my activities.

                    Would the other activities mean I was not "other"?
                    Your main business is contracting or freelancing or consulting or whatever, yes? Therefore Regardless of whether you're in IT or not, you'll be caught as a limited cost trader. Maybe you could in the past argue out of the 14.5% rate but not now out of the 16.5% rate now that the limited cost trader has been defined. Unless of course if your qualifying expenditure takes you out of it. Going by your earlier posts I don't think your buying and selling is any more than incidental.

                    Comment


                      #40
                      14.0% rather than 14.5%, Management Consultancy?

                      Comment

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