FRS VAT Above Low Cost Trader Minimum Spend

[jk3838]

Hi,

I have a question as to whether the minimum spend on goods figure to stay over the 2% turnover limit includes VAT or not (not the turnover figure which is inclusive of VAT but) the amount of spend on goods, is that 2% plus VAT or 2% including VAT ?


My actual circumstances are as below

Limited company (me and one employee) turnover per quarter is £35,000

This is £42,000 including VAT per quarter

My understanding is that in order to remain on my current FRS VAT percentage, I would have to spend above 2% of VAT inclusive turnover, so 2% of £42,000 which is £840

My question is this, is my minimum spend on goods £840 plus VAT, or £700 plus VAT (which is £840 including VAT) in order to not be classed as a low cost trader and therefore not to have to move to 16.5% repay rate?

[TheCyclingProgrammer]

Use gross amounts to work out the percentage. Gross goods purchase costs over gross turnover.

[Alan @ BroomeAffinity]

VAT inclusive figures, so turnover is vat inclusive and costs VAT inclusive. £840 is your magic number.

[jk3838]

so to be clear we need to spend £700 plus VAT ?

which is £840 TOTAL INCLUDING VAT

(NOT £840 plus VAT which would be £1008 total) ?

[TheCyclingProgrammer]

so to be clear we need to spend £700 plus VAT ?

which is £840 TOTAL INCLUDING VAT

(NOT £840 plus VAT which would be £1008 total) ?

Yes.

[northernladuk]

What goods are you thinking off if you don't mind me asking?

[jk3838]

What goods are you thinking off if you don't mind me asking?

don't mind at all

I'm thinking of purchasing a plotter (which is capital expenditure) and buying in paper and cartridges to supply scale design patterns which I think qualify as 'consumables'

Also we are planning to do more engineering model making, so anything to do with that, steel, wood, modeling clay and perhaps an SLS 3D printing service at some point in the future

Need to confirm with accountant but I think the above will qualify but open to any opinions to confirm or refute that

[TheCyclingProgrammer]

don't mind at all

I'm thinking of purchasing a plotter (which is capital expenditure) and buying in paper and cartridges to supply scale design patterns which I think qualify as 'consumables'

Also we are planning to do more engineering model making, so anything to do with that, steel, wood, modeling clay and perhaps an SLS 3D printing service at some point in the future

Need to confirm with accountant but I think the above will qualify but open to any opinions to confirm or refute that

The capital expenditure won't count but the consumables should.

[jk3838]

The capital expenditure won't count but the consumables should.

yes exactly my understanding

the plotter is capital expenditure and is not included in VAT total

any paper and cartridges purchased each quarter to 'feed it' however, would qualify towards the 2% 'goods' they will require for us to buy for us not to be deemed a low cost trader

So, I think I'm correct in saying that if I use more £700 plus VAT in a quarter, then I can stay on my current FRS VAT rate for that quarter

I will invoice end client for the supply of scale design patterns at a greater value than £700 plus VAT per quarter