Flat rate scheme - bank interest

[Lewis]

Bank interest should be included in the flat rate VAT calculation.
HMRC did an update to notice 733 to make it clear (April 2009).

If my memory serves me correctly, I think this refers to just how to calculate your total turnover in order to determine if you need to register for VAT or not. If does not refer to how you calculate the VAT due. It was all discussed here and on Shout99 before. Searching will find it.

[PhilAtBFCA]

Flat Rate Turnover

If my memory serves me correctly, I think this refers to just how to calculate your total turnover in order to determine if you need to register for VAT or not. If does not refer to how you calculate the VAT due. It was all discussed here and on Shout99 before. Searching will find it.

Sorry Lewis but no.

From HMRC:-

You calculate your VAT payable to HMRC by applying your flat rate VAT percentage to your 'flat rate turnover'.

And

Your flat rate turnover is all the supplies your business makes including all:

VAT inclusive sales for standard rate, zero rate and reduced rate supplies
sales of exempt supplies, such as rent or lottery commission - you don't have to make any partial exemption calculations

Phil

[krytonsheep]

Phil, the update to 733 is towards the bottom of the web page you posted (they haven't actually updated the main body for some reason).

Update 1 issued April 2009

This update explains the changes to the eligibility criteria and clarifies what is included in the flat rate turnover.

....
Paragraph 6.2. What must I include in my flat rate turnover?

Delete second bullet and replace with:

* the value of exempt supplies, such as any rental income, bank interest on a business account or lottery commission. These examples are not exhaustive and you can find out more about exempt income in Notice 700 The VAT Guide.

[PhilAtBFCA]

Bank Interest and Flat Rate Scheme

Out of interest, if the income were from a Foreign bank on a foreign held account then would that still need to be reported? I beleive that would strictly be outside the scope rather than exempt and then not need to be included in FRS turnover.

ASB - Thanks yes in theory I agree with you. I am researching that one to check to be 100% and thanks for the idea, it certainly could help some clients.

Phil, the update to 733 is towards the bottom of the web page you posted (they haven't actually updated the main body for some reason).

krytonsheep - Thanks, very grateful ! I missed that completely, I really should learn to read to the bottom of a page I have updated our Knowledgebase article to reflect this.

Phil

[ASB]

ASB - Thanks yes in theory I agree with you. I am researching that one to check to be 100% and thanks for the idea, it certainly could help some clients.

Well, if it can help any of your clients you are of course welcome. You know where to send the commission.

Personally whilst I was trading I never joined FRS simply because I could never get a concrete opinion from HMRC whether all the work I did abroad was zero rated or outside the scope - obviously very important from an FRS point of view. I believe from the place of supply rules that the supplies were in fact outside the scope, but I could never be 100% certain and didn't fancy the prospect of potentially having to hand over 12% of the revenue in FRS payments if an actual decision went against me.

[centurian]

Phil, the update to 733 is towards the bottom of the web page you posted (they haven't actually updated the main body for some reason).

Sorry, but does this mean we should include interest on FRS turnover or not?

[PhilAtBFCA]

Bank Interest and FRS

Hi Centurian,

"Yes"

Phil

[centurian]

Hi Centurian,

"Yes"

Phil

Bugger.

I guess this hits the established contractors harder as they will have more retained profits to glean interest from.

5% on 100K is another 5K turnover to pay 13% on (when VAT rates go back up). That's £650 which eats considerably into the benefit of FRS.

[Lewis]

Bugger.

I guess this hits the established contractors harder as they will have more retained profits to glean interest from.

5% on 100K is another 5K turnover to pay 13% on (when VAT rates go back up). That's £650 which eats considerably into the benefit of FRS.

One caveat, neither my current nor previous accountants included bank interest in the FRS calculation. I downloaded the SJD accounting sheet out of interest (who are neither my current nor previous accountant) and as far as I can tell from their example on the first tab they don't include it either. I am pretty sure in the last thread about this someone said they didn't include it and it wasn't mentioned in their VAT inspection. I don't know if you should or should not, sounds like the people here know their stuff and it should. But I am following my accountants advice over some unknown person on a forum (as I can at least reasonably defend that position to a VAT inspector). My advice would be to do the same, but certainly raise the issue with you accountants and point them in the direction of this information if you think they are wrong.

[krytonsheep]

Lewis, if you're not sure about including bank interest then just give HMRC a quick call.