Flat rate scheme quickie

[Hogan]

I just wanted to check my understanding (or lack) of how the VAT flat rate scheme works ...

If say I invoice a client for £1000 + VAT at 17.5%, total invoice is £1175.

Now when it comes to VAT return time, if I'm registered to pay 13% on the FRS, is the amount of VAT the following:

1. 13% of £1000 = £130

or

2. 13% of £1175 = £152.75

If it's the second way, then I guess the FRS isn't as advantageous as I had first thought ... doh!

[minstrel]

I just wanted to check my understanding (or lack) of how the VAT flat rate scheme works ...

If say I invoice a client for £1000 + VAT at 17.5%, total invoice is £1175.

Now when it comes to VAT return time, if I'm registered to pay 13% on the FRS, is the amount of VAT the following:

1. 13% of £1000 = £130

or

2. 13% of £1175 = £152.75

If it's the second way, then I guess the FRS isn't as advantageous as I had first thought ... doh!

It's the second way.

[Hogan]

Oh well ...

[Gonzo]

I just wanted to check my understanding (or lack) of how the VAT flat rate scheme works ...

If say I invoice a client for £1000 + VAT at 17.5%, total invoice is £1175.

Now when it comes to VAT return time, if I'm registered to pay 13% on the FRS, is the amount of VAT the following:

1. 13% of £1000 = £130

or

2. 13% of £1175 = £152.75

If it's the second way, then I guess the FRS isn't as advantageous as I had first thought ... doh!

Worse than that, the amount your company saves on VAT counts as profit so there is corporation tax to pay on it Nonetheless, still better than doing it the "old fashioned" way unless expenditure is high.

[DaveB]

On a 10,000 quid invoice overall you should come out about 350 quid better off than under the regular scheme ( Depending on your flat rate rate ), plus you dont have to worry about VAT receipts etc.

[Ivor1]

I've just put my first quarter VAT return in on flat rate, and it worked out to be about £1400 in my pocket, after taking off the VAT I have actually paid and 19% corp tax. Currently on 12% but flat rate well worth it IMO, seems a bit to good to be true.

[maverick]

FRS calculation

If you have saved £1400 on the FRS in your first quarter then that would mean that you have approx.

net sales = £42,000
gross sales = £49,350
vat due (@17.5%) = £7,350
vat due on FRS (gross sales @12%) = £5,922
vat saved = 7350-5922 = £1,428

This does not take into account the corp tax rate so you day rate is approx. £666.

I want to charge out at your rate.

[Ivor1]

If you have saved £1400 on the FRS in your first quarter then that would mean that you have approx.

net sales = £42,000
gross sales = £49,350
vat due (@17.5%) = £7,350
vat due on FRS (gross sales @12%) = £5,922
vat saved = 7350-5922 = £1,428

This does not take into account the corp tax rate so you day rate is approx. £666.

I want to charge out at your rate.

I wish £666 but no it isnt, just a sh*t load of weekend and out of hours work.

[Nixon Williams]

Assuming that you are an IT contractor then in the first year you boost your income by 3.4%, this falls to 2.225% from year 2.

We review our clients every VAT quarter and when we prepare the annual accounts and I would say 97% are better off on the scheme.

Not all who benefit have joined however, I am not sure why perhaps they think there is a hidden catch?

Alan