Originally posted by wattaj
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Reclaiming VAT and Corporation Tax under FRS
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Originally posted by ladymuck View PostThat's not 4.5% IIRC.
But my accountant said I have the option to go under standard rate in the future if my expenses start to creep up.Comment
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Originally posted by 80211 View PostWell what my accountant has said that limited cost business have to pay 16.5% but in the first its reduced by 1%. If I am charging the client 20% I get to keep the 4.5% difference in the first year.
So invoice £100
VAT £20
Total received £120
16.5% of £120 = £19.80
So for every £100 of before VAT income you will receive £100.20 after FRS deductions.
Now if the first year it's 15.5% which works out as 18.6% or £101.40 after FRS deduction but it's really not worth the hassle.
Just use Freeagent and let it do all the work for you.Last edited by eek; 13 October 2020, 11:36.merely at clientco for the entertainmentComment
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Originally posted by eek View PostYou need to speak to your accountant again as it's 16.5% of the total income (including VAT) which works out as 19.8% of the before the Amount.
So invoice £100
VAT £20
Total received £120
16.5% of £120 = £19.80
So for every £100 of before VAT income you will receive £100.20 after FRS deductions.
Now if the first year it's 15.5% which works out as 18.6% or £101.40 after FRS deduction but it's really not worth the hassle.
Just use Freeagent and let it do all the work for you.
The percentages are deliberately published the way they are so people will react precisely as the OP has.Comment
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Originally posted by 80211 View PostWell what my accountant has said that limited cost business have to pay 16.5% but in the first its reduced by 1%. If I am charging the client 20% I get to keep the 4.5% difference in the first year.
But my accountant said I have the option to go under standard rate in the future if my expenses start to creep up.
Simple example:
You invoice £1,000+VAT = £1,200.
15.5% of £1,200 = £186 VAT paid to HMRC.
So in first year, you pocket £14 output VAT for every £1,000 net invoiced. This is before factoring in not being able to reclaim VAT on your purchases.
When you're outside your first year, 16.5% of £1,200 = £198, so you're pocketing just £2 per £1,000 net invoiced. Again this is before factoring in losing ability to reclaim VAT on your purchases.
If your accountant did calculations and told you you'll be 4.5% better off under FRS, I don't see any possible way that could be correct. I would imagine you've probably got the wrong end of the stick.
(EDIT - I'm slow, eek beat me to it!)Comment
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Originally posted by eek View PostYou need to speak to your accountant again as it's 16.5% of the total income (including VAT) which works out as 19.8% of the before the Amount.
So invoice £100
VAT £20
Total received £120
16.5% of £120 = £19.80
So for every £100 of before VAT income you will receive £100.20 after FRS deductions.
Now if the first year it's 15.5% which works out as 18.6% or £101.40 after FRS deduction but it's really not worth the hassle.
Just use Freeagent and let it do all the work for you.
Sorry -Blog? What blog...?Comment
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Originally posted by malvolio View PostAnd the 20p is liable for CT of course...
Sorry -
But I really don't see what the benefit of the FRS is for most people - Freeagent does all the hard work for you so there is zero point being on the FRS as a contractor even if you had zero expenses / expenditure.
Heck you will probably be better off if your only expenditure is your accountants fees (which is why I don't think the OP has actually asked his accountant).merely at clientco for the entertainmentComment
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Originally posted by malvolio View PostAnd the 20p is liable for CT of course...
Sorry -Comment
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Originally posted by 80211 View PostLimited cost trader....
Still think that you're a troll.
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