VAT Registration

[Wanderer]

Looks ok to me but don't you get taxed on profit?

Yep, that's a gross profit not net.

I did delete the bit saying "Those of us here who have subcontractors may have substantial expenses, but so long as you pay them over £2,000 on each invoice you can claim the VAT back so you're still a winner." because the >2000 only applies to capital expenditure though.

[Scrag Meister]

Say £60,000 turnover, pre VAT reg.
VAT reg gives £60,000 + £10,500 VAT = £70,500 inc VAT at 17.5%.
You pay HMRC 12% of this (13% - 1% first year discount) = £7,200.
That gives your company £3,300 profit for doing pretty much nothing. Kerching.

How did that Math work? Did you do CSE not O level?

FRS is paid on Gross invoice value.

12% of £70500 is £8460, when at 13% its £9165

So thats £2040 profit at 12% and only £1335 at 13%.

Better check your previous VAT returns

[Wanderer]

FRS is paid on Gross invoice value.12% of £70500 is £8460, when at 13% its £9165 Better check your previous VAT returns

Thanks for the correction! Now I know why I have an accountant to do the returns for me rather than doing it myself.

It's still money for nothing though!

[Scrag Meister]

It's still money for nothing though!

Agreed, but not the same league as you initially hoped.

[TheCyclingProgrammer]

I completely disagree. To me (and probably most folks here), it's money for old rope! Here's my reasoning:

Sure, I see what you're saying and if you are already VAT registered (or HAVE to be) and your VAT reclaimable expenses are low then the FRS is a no-brainer.

My point was though, that once you've deducted the VAT that you *could* have reclaimed if you had been on the standard scheme, plus the extra time needed to administer your VAT account and returns (admittedly, it's not a lot, but time is valuable right?) and then deduct the corporation tax on your profit, then it isn't as lucrative as you'd think.

Sure, nobody is going to turn their nose up at an extra grand or so but if you're already turning over £60-70k each year, is it really worth the hassle of registering for VAT when you don't need to?

There are good reasons to register for VAT if you don't need to, I'm not convinced that the FRS surplus is one of them.

[tbrain]

Backdated VAT invoice

Ok,

My scenario is that I became self-employed & my accountant is currently in the process of submitting my VAT registration.

Now I have two options:

i) be VAT registered from todays date: 04/11/2010
ii) be VAT registered from the date I became self-employed: 09/09/2010

I understand that it would be simpler to go for option i, and this is being pushed by my accountant as I will obviously be liable for VAT if my agency doesn't pay the backdated invoice for September & October invoices n.b. these invoices both stated that VAT registration was pending, and that a VAT only invoice would follow once registration had been completed.

Having spoken to my agency, they have confirmed that it is common practice for them to pay VAT only invoices that they receipt, as this is common place.

Q. I am also registering on FRS, so I am assuming that if I backdate my VAT registration to 09/09/2010, I will also benefit to the tune of a few hundred quid as I will be registered at 11.5%

I'm assuming that if I register as of 04/11/2010, I stand to lose any potential FRS savings for the months of September & October?

Any comments appreciated.

[SueEllen]

Ok,

My scenario is that I became self-employed & my accountant is currently in the process of submitting my VAT registration.

We aren't self-employed on these forums we work through limited companies or umbrella companies.

If you want to find out about back-dating VAT invoices then do a search on these forums on how to do it properly.

The basic premise is that you issue every client/agency your company has done work for with an amended invoice for VAT i.e. you state what they have paid and then make it clear that they are just paying the VAT. If they refuse to pay you can inform HMRC about the company as you are collecting the money on their behalf.