Claiming VAT back on flat rate scheme. (£2k+ purchases)

[Notascooby]

Not wanting to be nosey but how long ago was this. HMRC would be interested if most of us were claiming 2.5k's worth of stuff every year or two.

Would they? I was wondering this myself but it's one of these things that get rolled-up. You could have bought a new bicycle or a PC or something even more specific.

It's a bit like travel and accomodation. I claim very little, others need to claim flights, hotels, food, taxis which will make my couple of grand seem like peanuts.

But without opening the books there's no way to tell if one is taking the piss or not. A remember, whilst there maybe trends for IT consultants, surely the same inspectors deal with a whole array of small companies, where annual capital costs will vary wildly.

Does anyone know any tax inspectors and if so, are inspections just random or are there "thresholds" or "patterns" that trigger alerts? I can't see how there could be....but I'm sadly naive on such things.

I type this as I'm thinking of buying another bicycle, just two years after claiming my last one and possibly doing a PC & iPad upgrade, which will all fall in the 12/13 tax year so be close to £5K in total.

[JamJarST]

Hmmm... That sounds counter-intuitive. My understanding was that you exclude the capital expenditure from your gross turnover else you'd recover VAT at 34.5%, but I could be wrong. A llittle light reading beckons. Watch this space...


Thought I read it right. You claim the purchase VAT back in Box 4 of the VAT100. But it goes on to say:


(my emphasis) which says to me that you exclude the total purchase price from your FRS VAT turnover calculation; in your above case you deduct the £2500 purchase cost

Any accountants want to offer an opinion??

Pretty sure you are wrong on that, otherwise you would have to increase you turnover by the capital expenditure amount.

[northernladuk]

Would they? I was wondering this myself but it's one of these things that get rolled-up. You could have bought a new bicycle or a PC or something even more specific.

It's a bit like travel and accomodation. I claim very little, others need to claim flights, hotels, food, taxis which will make my couple of grand seem like peanuts.

But without opening the books there's no way to tell if one is taking the piss or not. A remember, whilst there maybe trends for IT consultants, surely the same inspectors deal with a whole array of small companies, where annual capital costs will vary wildly.

Does anyone know any tax inspectors and if so, are inspections just random or are there "thresholds" or "patterns" that trigger alerts? I can't see how there could be....but I'm sadly naive on such things.

I type this as I'm thinking of buying another bicycle, just two years after claiming my last one and possibly doing a PC & iPad upgrade, which will all fall in the 12/13 tax year so be close to £5K in total.

Are you sure you understand the 2K VAT rule???

[Mailman_1]

Do you have an original order that shows that this was all ordered at once?

I'd staple that to the invoices and you'd have a bloody good arguement IF investigated. Certainly a risk I'd be willing to take.

I ordered the items online. When i checked out and paid, the order confirmations came through seperately via email. I'll print the emails and the correspondence with Dell re putting it all on the same reciept. That should be fine, even if the reciept isn't in the format HMRC ideally require. It's not as if im trying to pull a fast one.

[Mailman_1]

Not wanting to be nosey but how long ago was this. HMRC would be interested if most of us were claiming 2.5k's worth of stuff every year or two.

Your noseyness is forgiven. About 2 or 3 yrs ago i bought something non- IT related for another company but forgot to reclaim the VAT on my 1/4 end. I had to fill a form, write a letter and wait 9 months to get the VAT refund.

What would it matter anyway? If you are re-claiming VAT on legitimate expenses over 2k, where is HMRC's problem?

[Mailman_1]

Hmmm... That sounds counter-intuitive. My understanding was that you exclude the capital expenditure from your gross turnover else you'd recover VAT at 34.5%, but I could be wrong. A llittle light reading beckons. Watch this space...


Thought I read it right. You claim the purchase VAT back in Box 4 of the VAT100. But it goes on to say:


(my emphasis) which says to me that you exclude the total purchase price from your FRS VAT turnover calculation; in your above case you deduct the £2500 purchase cost

Any accountants want to offer an opinion??

Gross turnover goes in the turnover calculation. What you owe on that in box 3, amount to claim back in box 4. Box 4 is then deducted from box 3 to reveal the amount to pay HMRC.



I disagree with Malvolio........

[northernladuk]

Your noseyness is forgiven. About 2 or 3 yrs ago i bought something non- IT related for another company but forgot to reclaim the VAT on my 1/4 end. I had to fill a form, write a letter and wait 9 months to get the VAT refund.

What would it matter anyway? If you are re-claiming VAT on legitimate expenses over 2k, where is HMRC's problem?

There are some rules. I believe one of them is not on items to be used for only a year but obviously got that covered. Anyway.. Does this example from HMRC site help??

Example
A business has gross sales of £94,000 (including output VAT at 17.5% of £14,000), and expenses of £58,750 (including irrecoverable VAT). The flat rate VAT @ 6% is £5,640. A new machine is purchased (qualifying for capital allowances) at a cost of £2,350 including VAT of £350.

The accounts will show:

Turnover £88,360 (£94,000 less £5,640 flat rate VAT)
Expenses £58,750
Profit £29,610

If VAT is not reclaimed on the asset the cost for capital allowances purposes will be £2,350. If VAT is reclaimed the cost will be £2,000.

[Notascooby]

Are you sure you understand the 2K VAT rule???

Think we're x-purpose here...

A new bicycle for me will be in excess of £2K, as would say a MBPro and iPad on same order.

So together the total would be >£5K made up of 2 seperate invoices of >£2K each.

What I was quering was your statement that having multiple entries on your accounts for greater than £2K would be frowned upon by Hector - and if so how / why?

[Notascooby]

There are some rules. I believe one of them is not on items to be used for only a year but obviously got that covered. Anyway.. Does this example from HMRC site help??

Example
A business has gross sales of £94,000 (including output VAT at 17.5% of £14,000), and expenses of £58,750 (including irrecoverable VAT). The flat rate VAT @ 6% is £5,640. A new machine is purchased (qualifying for capital allowances) at a cost of £2,350 including VAT of £350.

The accounts will show:

Turnover £88,360 (£94,000 less £5,640 flat rate VAT)
Expenses £58,750
Profit £29,610

If VAT is not reclaimed on the asset the cost for capital allowances purposes will be £2,350. If VAT is reclaimed the cost will be £2,000.

aaah and this explains Mal's £50 difference.

[northernladuk]

Think we're x-purpose here...

A new bicycle for me will be in excess of £2K, as would say a MBPro and iPad on same order.

So together the total would be >£5K made up of 2 seperate invoices of >£2K each.

What I was quering was your statement that having multiple entries on your accounts for greater than £2K would be frowned upon by Hector - and if so how / why?

Maybe it is more my attitude to risk and not paying stupid prices for stuff but an iPad, unless you are developing apps' is not a valid business expense (cue argument) and claiming a 2K bike through work?? Sorry but that is taking the piss.. within the rules maybe, but taking the piss none the less.

A large majority of one man LTD's do not need to spend 2k on stuff and doing it multiple times must be worth a sniff IMO.

Maybe I am being overly pedantic but there you go.