Reclaiming VAT and Corporation Tax under FRS

[80211]

Hello all,

Just have a quick question regarding VAT and CT claim for a limited company.

I want to purchase a PC say for £1,000.

I am struggling to understand whether it is better to buy a PC and then register for VAT FRS and reclaim the VAT for this pc as it will be pre-registeration input tax.

If this is the case, can I then claim Corporation Tax relief as it will be expensed or is that not allowed?

Basically I am trying to find the best way utilise registeration of VAT and corporation tax for this expense and if only one is allowed then its a mere difference of 1% saving between 20% VAT and 19% CT.

Look forward to your replies.

Thanks
V

[Lance]

So many questions...

What does your accountant say?
How long you been trading?
Why FRS? Is it actually suitable for you? Maybe it is for one year but depends on other VAT items.
If you’re on FRS you cannot claim back VAT on capital purchases less than £2,000, so you can’t do what you want anyway.

[80211]

So many questions...

What does your accountant say?
How long you been trading?
Why FRS? Is it actually suitable for you? Maybe it is for one year but depends on other VAT items.
If you’re on FRS you cannot claim back VAT on capital purchases less than £2,000, so you can’t do what you want anyway.

Well the accountant mentioned that I should wait before I purchase but I am not sure why!
Trading for two weeks and incorporated for 4.
FRS is better for the first year as my accountant mentioned I am a limited cost trader after doing a calculation on my expected expenses in year one however if they do go above then there's an option to switch and to be more precise I'm a consultant providing services only.
Understand I cannot claim back VAT post registerstion but my question is if I can simply put, is there a way to get 20% vat reclaim as well as 19% corporation tax relief on this PC worth £1,000. Or are you only allowed to have either/or so I can decide when to buy a pc i.e. pre-vat registration.

Just to add to the above, the FRS benefit of 2 weeks worth of VAT is lower than the VAT reclaim of PC and I don't mind registering for VAT to tomorrow's date so as get higher saving.

Best,
V

[TheCyclingProgrammer]

I would just register for standard VAT.

Even with the 1% discount in the first year, if you are planning to buy equipment in the first year the VAT savings on those assets plus the VAT savings on your normal admin expenses may well be more than the FRS surplus in which case the only benefit is marginally simpler paperwork.

The only way to be sure is to sit down and work it out based on your expected turnover and costs.

[80211]

I would just register for standard VAT.

Even with the 1% discount in the first year, if you are planning to buy equipment in the first year the VAT savings on those assets plus the VAT savings on your normal admin expenses may well be more than the FRS surplus in which case the only benefit is marginally simpler paperwork.

The only way to be sure is to sit down and work it out based on your expected turnover and costs.

Thanks for your response.
So if I were to register for standard VAT, does that mean I can then reclaim VAT @20% and corporation tax relief?

But what happens if I were to purchase this item pre-VAT FRS registration. Can I still reclaim VAT and Corporation tax relief?

Best,
V

[eek]

Thanks for your response.
So if I were to register for standard VAT, does that mean I can then reclaim VAT @20% and corporation tax relief?

But what happens if I were to purchase this item pre-VAT FRS registration. Can I still reclaim VAT and Corporation tax relief?

Best,
V

What do you mean by Corporation tax relief?

Go and read the First timers guide and find an accountant as belief me given your questions you will need one.

[wattaj]

I'm calling it early: troll.

Next.

[Maslins]

If you buy a £1k+VAT = £1.2k gross PC today, register for VAT tomorrow, then even if you go on FRS immediately you'd still be able to reclaim the VAT on your PC purchase.

Irrespective of what you do VAT-wise, your company will get CT relief. The only difference will be whether the CT relief is on the £1k net of VAT cost (if you can reclaim the VAT), or £1.2k gross cost (if you can't).

It is of course better to get the full £200 VAT back, than not be able to and get CT relief on that extra £200.

However, ignoring this one isolated transaction:
1) as TCP suggests, is the FRS really going to be beneficial for you?
2) whilst it is good to understand the basics of how taxes work, it's not worth getting too bogged down in individual transactions and trying to time things perfectly from a tax perspective. Focus on what's best for your business. Buy the PC if/when you need it.

[80211]

If you buy a £1k+VAT = £1.2k gross PC today, register for VAT tomorrow, then even if you go on FRS immediately you'd still be able to reclaim the VAT on your PC purchase.

Irrespective of what you do VAT-wise, your company will get CT relief. The only difference will be whether the CT relief is on the £1k net of VAT cost (if you can reclaim the VAT), or £1.2k gross cost (if you can't).

It is of course better to get the full £200 VAT back, than not be able to and get CT relief on that extra £200.

However, ignoring this one isolated transaction:
1) as TCP suggests, is the FRS really going to be beneficial for you?
2) whilst it is good to understand the basics of how taxes work, it's not worth getting too bogged down in individual transactions and trying to time things perfectly from a tax perspective. Focus on what's best for your business. Buy the PC if/when you need it.

Thank you so much for taking the time to explain. Much appreciated.

This makes sense to me now.

And you are right in saying that I should make purchase as and when required rather than timing it but i was also trying to make it efficient if I can. Unfortunately, the pc I want to buy won't be released until November and having done a simple calculation, I am better of registering now under FRS to get 4.5% difference and not claim the PC VAT in the future.

Also, I guess timing pf VAT registration would matter more if a business has to procure a lot of goods unlike myself who just needs some equipment.

With regards to FRS, my accountant did the calculations and said I will be keeping 4.5% under FRS which in the long run is beneficial when compared to claiming vat under standard rate for my expenses. So I am going with that.

Best,
V

[wattaj]

Which FRS VAT category are you using and what is your SIC code?