Flat Rate VAT - VAT on Bank Interest?

[THEPUMA]

Is my accountant wrong as well?

Or is it poissibly you?

Yes your accountant is wrong as well.

I am never wrong. Arrogant but never wrong.

[Alan @ BroomeAffinity]

Yes your accountant is wrong as well.

I am never wrong. Arrogant but never wrong.

Thats a bold statement thepuma. I can hear the sound of virtual knives being sharpened!

[THEPUMA]

Thats a bold statement thepuma. I can hear the sound of virtual knoves being sharpened!

I know. I am waiting with baited breath.

[THEPUMA]

Incidentally, for those of you who are PCG members, there is apparently a long thread about it on the PCG legal and accounting forum.

It also concludes, quite conclusively, that VAT is payable on bank interest.

[eazy]

VAT Guide Notice 733

It is clear from Notice 733 that Interest must be Included.

--------------------------------

Extracts from Flat VAT Guide Notice 733

3.3 How do I work out my total income for Test 2?
Leave out any anticipated sales of capital assets but include all of the following:
•the total value of the supplies you worked out in Test 1
• the value of any exempt supplies, such as rent, lottery commission or bank interest on a business account and
• any other income received or receivable by your business. This
includes any non-business income such as that from charitable
or educational activities.

[max]

It is clear from Notice 733 that Interest must be Included.

--------------------------------

Extracts from Flat VAT Guide Notice 733

3.3 How do I work out my total income for Test 2?
Leave out any anticipated sales of capital assets but include all of the following:
•the total value of the supplies you worked out in Test 1
• the value of any exempt supplies, such as rent, lottery commission or bank interest on a business account and
• any other income received or receivable by your business. This
includes any non-business income such as that from charitable
or educational activities.

That is used to determine if you are allowed to use the FRS.

ie: if you total revenue is < 175K


However for determining your VAT the inputs are different.

Check out 6.1-6.3

Specifically 6.3 covers what you exclude:

"private income, for example income from shares"

and

"non-business income and any supplies outside the scope of UK VAT and"

these seem to indicate interest is not included in determining the VAT to pay.

interest on reserve accounts and time deposit is "private income", futhermore, interest is "outside the scope of UK VAT"

That how it was explained to me.

[Alan @ BroomeAffinity]

Sorry to be repetitive:

Interest is to be included in calculating the VAT due on FRS. Simple, conclusive and definite.

Its in black and white in the VAT notice and in my second posting on page2 of the thread if you care to look.

[blacjac]

You mean this one?

And this if from the same notice

6.2 What must I include in my flat rate turnover?
Your flat rate turnover is all the supplies your business makes, including VAT. This means all of the following:

the VAT inclusive sales and takings for standard rate, zero rate and reduced rate supplies
the value of exempt supplies, such as rent or lottery commission. You can find out more about exempt income in Notice 700 The VAT Guide
supplies of capital expenditure goods, unless they are supplies on which VAT has to be calculated outside the flat rate scheme in accordance with paragraph 15.9 and
the value of any despatches to other Member States of the EC if you are making intra EC supplies. For details see Notice 725 The Single Market.
Note: As exempt and zero rate supplies are included in flat rate turnover you apply the flat rate percentage to the exempt and zero rate turnover. You may pay more VAT by being on the scheme if these supplies are a larger proportion of your business turnover than the average for your trade sector.

----

So I guess that when determining your turnover to apply for the FRS you exclude it but when actually doing your VAT return you include it.

Seems a bit contradictory but then that's the VAT man for you I guess.

The one that clearly states exempt supplies (which you highligted).
This is in a paragraph explaining the previous sentance, which is specifically talking about "supplies that your business makes"


Since when was bank interest recieved a supply that my company makes?

[THEPUMA]

Since when was bank interest recieved a supply that my company makes?

http://customs.hmrc.gov.uk/channelsP...ent#P211_19578

Section 4.1

"Interest received on money deposited is consideration for an exempt supply."

[diesel]

so whats the conclusion from this thread? Is VAT is payable on Interest or not?

(Currently i receive Interest as normal on my business bank account.Accountant never specified anything about charging VAT to the bank as it sjust accounted as "other income", and i pay myself the interest minus corp. tax.)