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Tax Tribunals : VAT Flat Rate Scheme and Bank Interest

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    #11
    VAT Flat Rate and Bank Interest

    Originally posted by Clare@InTouch View Post
    Just an update for everyone on this - I spoke to HMRC VAT Expertise people today who tell me that they are still waiting to hear if HMRC are going to appeal the decision, so at present their existing advice to include it as turnover still stands. This was backed up by a professional tax course I attended this morning too.

    We will keep an eye out for Business Briefs issued by HMRC to see how they intend to proceed.

    It's also worth noting that this case applies to passive interest on a business account. If the whole purpose of money being put into an account is to gain interest then it's a potentially different story. Again, we can clarify when we know more from Hector himself.

    Has there been any update on this one ? VAT guidance issued today suggests not...

    6.2 What must I include in my flat rate turnover?
    Your flat rate turnover is all the supplies your business makes, including VAT. This means all of the following:
     the VAT inclusive sales and takings for standard rate, zero rate and reduced rate supplies
     the value of exempt income, such as any rent, bank interest on a business account or lottery commission. These examples are not exhaustive and you can find out more about exempt income in Notice 700 The VAT Guide.
     supplies of capital expenditure goods, unless they are supplies on which VAT has to be calculated outside the flat rate scheme in accordance with paragraph 15.9 and
     the value of any despatches to other Member States of the EC if you are making intra EC supplies. For details see Notice 725 The Single Market.
    Note: As exempt and zero rate supplies are included in your flat rate turnover you apply the flat rate percentage to the exempt and zero rate turnover. You may pay more VAT by being on the scheme if these supplies are a larger proportion of your business turnover than the average for your trade sector.


    Cheers

    Robot

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      #12
      Nope - I called HMRC to ask and was simply told to look out for future Business Brief releases. I have been, and nothing yet.

      I'll call them again and see if I can talk to someone senior.
      ContractorUK Best Forum Adviser 2013

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        #13
        Do we know if HMRC appealed or not, as the date for appeal has long since past? My previous and current accountants are saying to await clarification from HMRC before claiming a refund of VAT paid on bank interest. I assume that HMRC are obliged to issue guidance within a certain timeframe? Will they delay so as to keep VAT paid on interest more than 3 years ago perhaps?

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          #14
          Nothing from HMRC yet, but our view is that their current guidance is incorrect. I would suggest you check with your accountant to see what their view is and see whether you still want to include it in your calculations.
          ContractorUK Best Forum Adviser 2013

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            #15
            Some of my colleagues recently attended a VAT update course and were informed that they should be excluding interest from the calculations; with this in mind it could be time to start working on those refunds!
            Yes there is nothing concrete to confirm this but if the appeal date has passed I can't see how any other ruling can be passed.
            http://uk.linkedin.com/pub/dan-moss/18/18/105

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              #16
              So if we've all been slightly overpaying VAT for 4 years, does this means 4 years worth of accounts and corporation tax returns are will be slightly wrong too?
              Will work inside IR35. Or for food.

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                #17
                Originally posted by VectraMan View Post
                So if we've all been slightly overpaying VAT for 4 years, does this means 4 years worth of accounts and corporation tax returns are will be slightly wrong too?
                I think in most cases the interest is minimal, therefore the flat rate saving would be even smaller, then applying 20%(depending on the years) corporation tax, we could be talking less than £10 for most people, so not worth re-filling accounts for.
                http://uk.linkedin.com/pub/dan-moss/18/18/105

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                  #18
                  Should we just work out what the refund is and knock it off the next VAT payment? No need to tell anyone, just explain it if ever investigated?

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                    #19
                    Originally posted by Olly View Post
                    Should we just work out what the refund is and knock it off the next VAT payment? No need to tell anyone, just explain it if ever investigated?
                    Effectively yes. If it’s greater than £10K then it would be a separate form, howevr if this was the case then you would have to question if the interest was part of the relevant turnover in which case it should be subject to VAT!!!
                    http://uk.linkedin.com/pub/dan-moss/18/18/105

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                      #20
                      So is it safe to try and claim back VAT payments on bank interest or is the jury still out and we should wait and see ?

                      Thanks
                      The Flufster

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