Simple VAT Question

[Lewis]

You mean asking him why Jaffa Cakes are vat free when they are clearly biscuits isn''t going to help?

Hello ... they're not called Jaffa Biscuits! They are cakes albeit little biscuity ones.

[Archangel]

Hello ... they're not called Jaffa Biscuits! They are cakes albeit little biscuity ones.

Biscuits go soft when they go off, cake goes hard. Jaffa Cakes go hard so they are cakes.

[ratewhore]

Isn't there an upper cap on FRS? WIth my old Ltd I never bothered because I expensed a lot, all wholly and exclusively for the business of course.

With my new company, I am hardly expensing anything but I thought the turnover limit was around the £150K mark so I never bothered applying for it...

[Archangel]

No that's not right. Your bank interest is not classed as turnover so no VAT applied but it will be included on your P&L account classed as other income ie you will pay corp tax on it (if you make a profit of course).

From the guide to Fixed rate VAT

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.

(My bold) Bank Interest is an exempt supply so should be counted

[Lewis]

From the guide to Fixed rate VAT

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.

(My bold) Bank Interest is an exempt supply so should be counted

I agree with Moorfield you ignore bank interest from the FRS calculation. My accountants are also in agreement.

[Archangel]

I agree with Moorfield you ignore bank interest from the FRS calculation. My accountants are also in agreement.

On what basis are you making that assertion (not your agreement with Moorfield )

[ctdctd]

From the VAT FRS guide on the webby at:-
http://customs.hmrc.gov.uk/channelsP...00345#P88_6880

This is the test to join the scheme - if you exclude Bank interest from this, then IMHO you also exclude from the FRS calculations?


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.

[Lewis]

I am confused now ... I thought you meant that you include bank interest in the quarterly FRS calculation.

Are you talking about including the bank interest in the £150K allowance which decides if you can join the FRS or not? (I don't know the answer to that)

[moorfield]

FFS No you don't. Speak to your accountant if you don't believe me.

[Lewis]

FFS No you don't. Speak to your accountant if you don't believe me.

If you are saying that when calculating the VAT you pay each quarter you include your bank interest as well as your invoices (+VAT) then I think you are wrong. My accountants (who frequent here a lot) have done VAT returns for me and they do not include bank interest. If I am wrong, I will be on their case! Mal, you are all knowing ... answer please