Which VAT scheme should I register?

[DaveB]

Quote:
Originally Posted by MrsGoof
You charge customer £1000 + £175 VAT total £1175

When you come to pay VAT on the flat rate scheme you pay 13% of the gross = £152.75

enroute you have just pocketed the difference between VAT charged and VAT paid £22.25

SO multiply it up to say £10k then its £222.5 for doing nowt.

Do you then have to pay CT on the difference ?

Yes, it becomes part of your companies gross profits.

And check the categories within the FRS. Depending on the work you do you can get it down to 10% for the first year.

[XLMonkey]

Yes, you pay CT - it's still free money though. In the first year, if you're getting, say, 350/day and working 200 days/year, you end up with

70,000 * 5% = 3,500 extra profit
minus 19% CT = 665

net result = 2,835 more cash in the company than you would have received otherwise. Result

[Viktor]

Yes, you pay CT - it's still free money though. In the first year, if you're getting, say, 350/day and working 200 days/year, you end up with

70,000 * 5% = 3,500 extra profit
minus 19% CT = 665

net result = 2,835 more cash in the company than you would have received otherwise. Result

Wrong Monkey,

you pay 12% out of your gross turnover, including VAT, so you end up with

VAT paid = 70.000 * 12% = 8400
VAT collected = 70.000 - 70.000/1.175 = 10.426

Profit = 10.426 - 8400 = 2026 - CT = 1641 dosh in pocket

RESULT

[martinb]

Are you sure?

Wrong Monkey,

you pay 12% out of your gross turnover, including VAT, so you end up with

VAT paid = 70.000 * 12% = 8400
VAT collected = 70.000 - 70.000/1.175 = 10.426

Profit = 10.426 - 8400 = 2026 - CT = 1641 dosh in pocket

RESULT

Given that hourly rate would be quoted net of VAT I would suggest...

Billed to client = 70,000 + VAT = 82,250
Flat rate of 12% on VAT *INCLUSIVE* turnover = 82,250 * 12% = 9,870
Diff between VAT billed to client and VAT sent to tax man = 12,250-9,870 = 2380
Corp Tax of 19% on "profit" = 452.20
Extra in your bank account = 2380-452.20 = 1927.80

(The above, of course, assumes no expenses on which VAT would be recooverable if flat rate not used)

[css_jay99]

Given that hourly rate would be quoted net of VAT I would suggest...

Billed to client = 70,000 + VAT = 82,250
Flat rate of 12% on VAT *INCLUSIVE* turnover = 82,250 * 12% = 9,870
Diff between VAT billed to client and VAT sent to tax man = 12,250-9,870 = 2380
Corp Tax of 19% on "profit" = 452.20
Extra in your bank account = 2380-452.20 = 1927.80

(The above, of course, assumes no expenses on which VAT would be recooverable if flat rate not used)

This implies that for revenue of (70,000 + VAT = 82,250), You have to buy £11,016 (i.e 1927.8/17.5%)worth of allowable company expenditure for the Flat rate Scheme not to be worthwhile !

css_jay99

[DaveB]

This implies that for revenue of (70,000 + VAT = 82,250), You have to buy £11,016 (i.e 1927.8/17.5%)worth of allowable company expenditure for the Flat rate Scheme not to be worthwhile !

css_jay99

Yep, unless you are a reseller of goods or services being charged large amounts of VAT by your suppliers the FRS is definately your best bet.

Remeber as well that you can still claim VAT back on capital purchases over £2000.

[Viktor]

Given that hourly rate would be quoted net of VAT I would suggest...

Billed to client = 70,000 + VAT = 82,250
Flat rate of 12% on VAT *INCLUSIVE* turnover = 82,250 * 12% = 9,870
Diff between VAT billed to client and VAT sent to tax man = 12,250-9,870 = 2380
Corp Tax of 19% on "profit" = 452.20
Extra in your bank account = 2380-452.20 = 1927.80

(The above, of course, assumes no expenses on which VAT would be recooverable if flat rate not used)

Anyway it's the same thing. The NET profit out of this would be 2,34 % of your VAT inclusive turnover...