Removal from Flat Rate Vat Scheme

[StrengthInNumbers]

Got a letter from HMRC that my Limited company is being removed from Flat rate Scheme. Turnover was only above £230,000 if I INCLUDE VAT in calculating turnover. Is is correct? I though turnover does not include VAT?

[jamesbrown]

Got a letter from HMRC that my Limited company is being removed from Flat rate Scheme. Turnover was only above £230,000 if I INCLUDE VAT in calculating turnover. Is is correct? I though turnover does not include VAT?

Yes, the calculation includes VAT, with exempt supplies not factoring on admission (i.e. taxable turnover) but factoring in the ongoing calculation of eligibility (i.e. all income). See VAT notice 733 for details.

[mudskipper]

Looks like that's correct - thresholds are excluding for joining, including for leaving.


InfoZone - Lots of other sites saying the same.

Turnover limits
You can only apply to use the Flat Rate Scheme if you expect your annual taxable turnover in the next 12 months to be no more than £150,000, excluding VAT.

...

Businesses must also leave the scheme:
On the anniversary of joining the scheme if your previous year's VAT-inclusive turnover was more than £230,000;


HMRC describe how to calculate Flat Rate Turnover

https://www.gov.uk/government/public...-rate-turnover

"the VAT inclusive sales and takings for standard rate, zero rate and reduced rate supplies"

[ChimpMaster]

Got a letter from HMRC that my Limited company is being removed from Flat rate Scheme. Turnover was only above £230,000 if I INCLUDE VAT in calculating turnover. Is is correct? I though turnover does not include VAT?

Well done, that's quite some turnover!

[PerfectStorm]

On the plus side you can now claim VAT on your lunch.

[dty]

This isn't a real question, this is just bragging!

[FMCG]

Now that you know the threshold more accurately.

If you can "mange" to keep it below - write to them and they will let you register again. In fact you do not even have to register - they will simply send you a letter to acknowledge.

[vwdan]

On the plus side you can now claim VAT on your lunch.

Even as a reasonably normal stay away contractor, I was 'up' last year on standard VAT vs flat rate. It's quite nice knocking the best part of 20% off most of my expences.

[jpdw]

Looks like that's correct - thresholds are excluding for joining, including for leaving.

Businesses must also leave the scheme:
On the anniversary of joining the scheme if your previous year's VAT-inclusive turnover was more than £230,000;

So if I understand this correctly, that's effectively a VAT exclusive revenue of £230/1.2 = £191k

Which, in a 'really good year' (no gaps, some holiday time) could be 47 weeks work which means you can generate around £800/day before having to quit FRS.

Whilst most of us can only dream of that as a day rate, it's not entirely unrealistic if you've 2 fee-earners in the company - as I do, though currently we've got some "gap" to use up before we would hit £800/day... still its good to have that figure in mind next time there a new contract or renewal rate negotiation.