Flat Rate Scheme - should I be using it or not?

[JRC1]

In summary, I'm an IT contractor, my previous accountant advised to apply for the FRS due to 'not having many VATable purchases'. I have now been on the scheme for 6+ months.

Fast forward to today, new accountant - advises that due to having £0 cost of goods, I can't use the scheme and need to be on the standard limited cost trader 16.5% rate.

Is this correct? I typically don't have any costs as an IT contractor and my previous accountant knew this, hence my current confusion.

I'm reading conflicting messages across the forums on this so hopefully someone can provide some clarity. A little baffled as to why my previous accountant did not mention a cost of goods amount that needs to be met (if that is indeed the case).

If I do need to return to the 16.5%, will I owe 2% VAT from the past 6+ months of trading?

Any fellow IT contractors currently using the FRS and if so, what costs of goods do you have/record?

Thanks in advance

[Lance]

your accountant is correct.

We all stopped using FRS when the change came in about limited cost businesses.
There is a tiny benefit in your first year of trading as there is a discount, but it's really tiny and by the time you'd had a few hotel stays and paid the accountancy bills it's not worth it.

and yes you are going to have to pay the difference.

[northernladuk]

Are you going to dump your new accountant and actually go to one you trust?

[Lance]

Are you going to dump your new accountant and actually go to one you trust?

I think the lack of trust is at the OP's end rather than the accountant. I would suggest it's premature to consider replacing on the basis of correct advice

just a though

[JRC1]

Yes correct - issue is with the accountant I already dumped, not the new one!

Thanks for confirming, will switch to the 16.5% and pay the difference

[Lance]

Yes correct - issue is with the accountant I already dumped, not the new one!

Thanks for confirming, will switch to the 16.5% and pay the difference

But why switch? Just go normal scheme. 20% but get vat back on accountancy fees + other expenses.

[JRC1]

But why switch? Just go normal scheme. 20% but get vat back on accountancy fees + other expenses.

I don’t incur any expenses though. No travel, no overnight stays - just weekly WFH allowance and the occasional trivial benefits, etc. so very minimal.

So my understanding was that a lower rate scheme was beneficial if minimal expenses were incurred - is that not the case?

[Lance]

I don’t incur any expenses though. No travel, no overnight stays - just weekly WFH allowance and the occasional trivial benefits, etc. so very minimal.

So my understanding was that a lower rate scheme was beneficial if minimal expenses were incurred - is that not the case?

knowing that you came here to ask if you were classed as a limited cost business ???


At 16.5%, with the calculations I did at the time, 1 year accountancy + my Microsoft subscriptions was enough to be on normal scheme.
Do you not use computers? Or a phone?

Either way get the accountant to run some numbers for you.

[hobnob]

I don’t incur any expenses though. No travel, no overnight stays - just weekly WFH allowance and the occasional trivial benefits, etc. so very minimal.

How about your accountant? I assume that they charge you VAT.