Flat Rate VAT and implications - confirmation

[christhedon]

Hi,

Can anyone confirm my understanding/calculations of VAT is correct?

A few examples:

1) Non flat rate. Earning 117.5k inc VAT. Buying nothing

Pay tax 17500 to IR.

2) Non flat rate. Earning 117.5k inc VAT. Spending 10k on goods which you can claim back VAT.

10k equates to 1500 VAT 10k - (10k/1.175)

Pay tax IR 16k to IR

3) Flat rate. Earning 117.5k inc VAT. Spend 10k on goods all worth under 2k each.

117.5k * 12% = 14100

Pay tax 14100 to IR.

VAT claimed 3400. The equivalent you would have to spend not under flat rate = 3400/0.175 = 19.5K

Are my results correct for each example?

Thanks,

Chris

[thunderlizard]

Yup. Reck'n so.

[malvolio]

The other thing to to note, however, is that the "saved" VAT is added to your annual profit figure and is therefore liable to CT at 19%. So in your example 3, add 19% of 3400 to your VAT paid and it goes up to £14746, so not quite so much of a saving as it first appears...

[Sockpuppet]

What the difference between flat rate and non flat rate?

[Robot]

What the difference between flat rate and non flat rate?

Non Flat Rate VAT

Sales £100 + VAT = £117.50

To pay HMR&C £17.50 but you can reclaim input VAT (VAT on expenses and capital items)

Say input VAT in one quarter was £150.

So you pay HMR&C £17.50 but reclaim input VAT of £150 from HMR&C so you have a repayment of £132.50

Of course over the year your turnover could be £100K then add VAT @ 17.5% = £117,500

You owe HMR&C £17,500 less input VAT say of £600 = £16,900.

VAT flat rate

£117,500 * 12% (one Per% discount) = £14,100 so you have a Gross Profit of £3,400 less of course input VAT you can not reclaim (as expenses in P&L are higher) £600 = £2800 * 19% (corporation tax on additional profit) £532, so additional income via dividends could be £2,268.

So provided your input VAT is not more than £3,400 in the first year then it makes sense to join the VAT flat rate scheme.

[Sockpuppet]

Cheers fella.... goes on with his life blissfully unaware...

I think that falls into the category "that what I pay my accountant for".

[BoredBloke]

"I think that falls into the category "that what I pay my accountant for".

My accountant didn't suggest joining as he earns money from doing my VAT (or used to). I'm now going join the flat rate scheme.

[Sockpuppet]

"I think that falls into the category "that what I pay my accountant for".

My accountant didn't suggest joining as he earns money from doing my VAT (or used to). I'm now going join the flat rate scheme.

Tis ok, my accountant is Gordan Brown.

threaded

[shippwreck]

huh,

I've just had this conversation with my accountant and at first i didn't quite believe em... but its true.

You see the only expenses i will have are my 40p per mile (which you can only claim 1p back of) and then bog standard stationary etc... possibly £50 startup and then i would guess at £10 a month ish... plus general misc food and suddenly i'm making quite a bit from Mr TAX man for registering for the flat rate scheme...

hmmm i have a happy feeling finally about this whole TAX thing!

[DaveB]

Have a good think about how you classify your business as well. It affects the rate you get.

Not being a coder/developer/hardware type I registered as other/business consultancy ( IIR the terminology right ) which means 11% Vat rather than 13%. 10% for the 1st year.