VAT Flat Rate Scheme Update

[SueEllen]

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.

Do you think IT contractors only work for IT companies like IBM?

[Alan @ BroomeAffinity]

Do you think IT contractors only work for IT companies like IBM?

Doesn't matter if he's in IT or not anyway. Limited Cost Traders will apply across all sectors. I think this is what our man isn't picking up on.

[MarkT]

Doesn't matter if he's in IT or not anyway. Limited Cost Traders will apply across all sectors. I think this is what our man isn't picking up on.

My argument over IT was under the old rules.

I'd missed the Limited Cost Trader bit and hadn't done any research on how it might affect me after the December papers.
Now I have and I stand utterly and totally corrected.

[Alan @ BroomeAffinity]

My argument over IT was under the old rules.

I'd missed the Limited Cost Trader bit and hadn't done any research on how it might affect me after the December papers.
Now I have and I stand utterly and totally corrected.

I did wonder. No harm done and if you need any help just shout.

[dmini]

So what DOES qualify?

Alan, maybe you can clarify a couple of things that puzzle me at the moment.
What would be acceptable in your eyes under the term of "goods" - as I have yet to find a list of potentially qualifying goods - just the ones that don't!.
OK there is the one example they give of printer ink - but that is all! Is the definition of "goods" something tangible that you can touch - or could it include for example a CBTNuggets subscription - or a training course?

The other thing that intrigues me is this "accounting period". Are we talking the 3 month payment period, or annual accounts. My reading is that it is the annual one.

Oh and before someone says "why don't you ask your accountant" I am asking him as well. However, second (qualified) opinions are always useful!

[Alan @ BroomeAffinity]

Alan, maybe you can clarify a couple of things that puzzle me at the moment.
What would be acceptable in your eyes under the term of "goods" - as I have yet to find a list of potentially qualifying goods - just the ones that don't!.
OK there is the one example they give of printer ink - but that is all! Is the definition of "goods" something tangible that you can touch - or could it include for example a CBTNuggets subscription - or a training course?

The other thing that intrigues me is this "accounting period". Are we talking the 3 month payment period, or annual accounts. My reading is that it is the annual one.

Oh and before someone says "why don't you ask your accountant" I am asking him as well. However, second (qualified) opinions are always useful!

According to HMRC:

Examples of relevant goods
This isn’t an exhaustive list:

stationery and other office supplies to be used exclusively for the business
gas and electricity used exclusively for your business
fuel for a taxi owned by a taxi firm
stock for a shop
cleaning products to be used exclusively for the business
hair products to use to provide hairdressing services
standard software, provided on a disk.

[Alan @ BroomeAffinity]

Examples of supplies that aren’t relevant goods
This isn’t an exhaustive list:

accountancy fees, these are services
advertising costs, these are services
an item leased/hired to your business, this counts as services, as ownership will never transfer to your business
food and drink for you or your staff, these are excluded goods
fuel for a car this is excluded unless operating in the transport sector using your own, or a leased vehicle
laptop or mobile phone for use by the business, this is excluded as it is capital expenditure see paragraph 15.1
anything provided electronically, for example a downloaded magazine, these are services
rent, this is a service
software you download, this is a service
software designed specifically for you (bespoke software), this is a service even if it is not supplied electronically

[Lambert Simnel]

Examples of supplies that aren’t relevant goods
This isn’t an exhaustive list:

accountancy fees, these are services
advertising costs, these are services
an item leased/hired to your business, this counts as services, as ownership will never transfer to your business
food and drink for you or your staff, these are excluded goods
fuel for a car this is excluded unless operating in the transport sector using your own, or a leased vehicle
laptop or mobile phone for use by the business, this is excluded as it is capital expenditure see paragraph 15.1
anything provided electronically, for example a downloaded magazine, these are services
rent, this is a service
software you download, this is a service
software designed specifically for you (bespoke software), this is a service even if it is not supplied electronically

Just out of interest, Alan, do you reckon this bias against "services" is a stance taken as an anti-avoidance measure? It seems very 20th century in its outlook, otherwise.

[Alan @ BroomeAffinity]

Just out of interest, Alan, do you reckon this bias against "services" is a stance taken as an anti-avoidance measure? It seems very 20th century in its outlook, otherwise.

No - it's because those traders they want moved into 16.5% don't buy goods as much as services. The list is constructed accordingly.

[Lambert Simnel]

No - it's because those traders they want moved into 16.5% don't buy goods as much as services. The list is constructed accordingly.

Hmm. Maybe I'm seeing depth here which wasn't intended then?

I thought the key target for this legislation was the raft of two person companies being set up by unscrupulous outsourcers - basically providing (say) cleaning services through 20 or 30 different companies to take advantage of the Employers NI rebate and the advantages of FRS whilst staying under the £250k per company threshold. Clearly services are just as valid a cost for a small business as physical materials, and no-one, not even HMRC, could think otherwise. However, I'd imagine that if services were allowable towards the "relevant goods" then we'd see avoidance through a matrix of small companies cross-charging each other to the extent necessary for the FRS to still be worthwhile, and that's why the slightly odd definition for allowable costs has been adopted.

All a bit academic, I guess.