First year FRS limit

[ContractorBanking]

On FRS, there is a first year limit of £150k pre-VAT turnover.
This extends to £230k VAT-inclusive in subsequent years.

If you extend the first year accounting period, is the £150k threshold prorated?

thanks

[Kenny@MyAccountantFriend]

The thresholds are based on a rolling 12 month period.

Once on the scheme the higher threshold applies so if you are unsure go below 150 and then if it's slightly higher it won't be an issue as you can go to 230 before having to leave.

[Andrew@Wisteria]

The thresholds are based on a rolling 12 month period.

Agree with the 12 month period. Although not sure it's rolling. See para 12.2 of the below - refers to anniversary of start date.

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

[dingdong]

Having recently been forced out of FRS I can confirm its your position at the VAT anniversary date that matters rather than a rolling 12 month position.

HMRC will give you a slight bonus though as they let you stay in the FRS scheme for the remainder of the quarter that your VAT registration anniversary date falls in. You then have to switch to standard VAT from the beginning of the following quarter.

[Andrew@Wisteria]

On FRS, there is a first year limit of £150k pre-VAT turnover.
This extends to £230k VAT-inclusive in subsequent years.

If you extend the first year accounting period, is the £150k threshold prorated?

thanks

If you can argue the next 12 months are less than £191.5k you may be allowed to stay in.

[ContractorBanking]

A follow up to this - how is the 150k limit calculated, is it?

a) pre-VAT invoice amount
b) or is it VAT inclusive - FRS VAT paid, i.e. same as a) but includes the FRS VAT savings

Couldn't find anything to confirm the calculation on HMRC site.

Thanks

[ContractorBanking]

Actually upon closer inspection, it looks like it's a), the HMRC text stares:

To join the scheme your VAT turnover must be £150,000 or less (excluding VAT), and you must apply to HMRC.

[jamesbrown]

Actually upon closer inspection, it looks like it's a), the HMRC text stares:

To join the scheme your VAT turnover must be £150,000 or less (excluding VAT), and you must apply to HMRC.

Correct, but bear in mind that the 230k limit to leave the scheme includes VAT.

[ContractorBanking]

Correct. Odd that they include 150k excl VAT and 230 inc VAT.

Curious to know, how many of us are approaching the 230k inc VAT turnover threshold? Presumably if you're hovering around that mark makes sense to stay within FRS and not lose the FRS margin rather than bank the additional turnover..

[jamesbrown]

Correct. Odd that they include 150k excl VAT and 230 inc VAT.

Curious to know, how many of us are approaching the 230k inc VAT turnover threshold? Presumably if you're hovering around that mark makes sense to stay within FRS and not lose the FRS margin rather than bank the additional turnover..

Yes, the trade-off involves a straightforward calculation for any one year. I suppose it's somewhat more complicated as a strategic decision; you don't want the tail wagging the dog. My turnover varies quite dramatically between years and very few of my supplies are within scope anyway, so I personally can't use it (or wouldn't bother if I could). I would imagine that the vast majority on CUK can and do use it.