Hi there, sorry for the long 1st post, hope someone could take a look at the numbers
I recently moved from an ubmrella co to my own Ltd Co with a new contract.
I've completed my 1st month & have received the P&L statement from my accountant. I have a few questions which I asked the accountant but ended up more confused.
I have submitted 4 invoices. The 1st 3 shown above were for services. The 4th was a VAT only invoice issued to catch the VAT due on the 1st 3 invoices which were issued before my company VAT registration was completed. I have also since applied for the FRS
It looks to me from the numbers above that the "income" from VAT (invoice 4) has been used in calculating the turnover which I didn't think it should be.
My fag packet calculation would be net turnover £5589 from the 1st 3 invoices then 20% of this is the VAT £1,117.90
Then deduct expenses of £2,619.76 from £5589 giving £2,969.24 profit before tax. I think I'd need to add the flat rate VAT saving of £212.38 based on 13.5% for the 1st year to the profit before tax to get £3,181.62
80% of this is £2,545.29 which I think is the profit available for dividends.
Accountant said
"With regards to the confusion in relation to the figures on your profit and loss summary, please see the below breakdown, which shows no difference in your figures if VAT was charged initially rather than separately:
Invoice Net Gross
1 £2,218.73 £2,565.00
2 £1,307.88 £1,512.00
3 £1,307.88 £1,512.00
4 £966.90 £1,117.80
£5,801.39 £6,706.80
Invoice Net Gross
1 £2,662.47 £3,078.00
2 £1,569.46 £1,814.40
3 £1,569.46 £1,814.40
£5,801.39 £6,706.80
As you can see, the above figures do not match the figures as per the profit and loss summary you received, however that’s because flat rate VAT has not yet been applied to your invoices yet – this is something that will be done on receipt of your approval letter. To bring your figures up to date, an adjustment will be made on your next profit and loss summary.
So if you can just overlook that fact for a moment, you can see that once flat rate VAT has been applied to your invoices, there is no difference between your figures, whether the VAT was charged separately on an invoice or if it was charged initially when the invoices were first raised.
The first example is with the VAT charged separately – the flat rate percentage of 13.5% is applied to the gross amount of your invoices, so you multiply the gross by 0.865, and this gives you are up to date net figure. The reason we calculate this new up to date net figure is because when you pay VAT, you pay in line with your flat rate, so this calculation takes into account the actual VAT you will be paying across rather than the full 20%.
The second example is with the VAT charged initially – the 20% VAT is charged on top of the initial amount, giving us a net, VAT and gross amount. However, again the flat rate percentage of 13.5% is applied to the gross amount to calculate the new net amount that we need, and this new amount is used in place of the standard rate (20% VAT) net amount, for the same reason as mentioned above. "
I recently moved from an ubmrella co to my own Ltd Co with a new contract.
I've completed my 1st month & have received the P&L statement from my accountant. I have a few questions which I asked the accountant but ended up more confused.
I have submitted 4 invoices. The 1st 3 shown above were for services. The 4th was a VAT only invoice issued to catch the VAT due on the 1st 3 invoices which were issued before my company VAT registration was completed. I have also since applied for the FRS
It looks to me from the numbers above that the "income" from VAT (invoice 4) has been used in calculating the turnover which I didn't think it should be.
My fag packet calculation would be net turnover £5589 from the 1st 3 invoices then 20% of this is the VAT £1,117.90
Then deduct expenses of £2,619.76 from £5589 giving £2,969.24 profit before tax. I think I'd need to add the flat rate VAT saving of £212.38 based on 13.5% for the 1st year to the profit before tax to get £3,181.62
80% of this is £2,545.29 which I think is the profit available for dividends.
Accountant said
"With regards to the confusion in relation to the figures on your profit and loss summary, please see the below breakdown, which shows no difference in your figures if VAT was charged initially rather than separately:
Invoice Net Gross
1 £2,218.73 £2,565.00
2 £1,307.88 £1,512.00
3 £1,307.88 £1,512.00
4 £966.90 £1,117.80
£5,801.39 £6,706.80
Invoice Net Gross
1 £2,662.47 £3,078.00
2 £1,569.46 £1,814.40
3 £1,569.46 £1,814.40
£5,801.39 £6,706.80
As you can see, the above figures do not match the figures as per the profit and loss summary you received, however that’s because flat rate VAT has not yet been applied to your invoices yet – this is something that will be done on receipt of your approval letter. To bring your figures up to date, an adjustment will be made on your next profit and loss summary.
So if you can just overlook that fact for a moment, you can see that once flat rate VAT has been applied to your invoices, there is no difference between your figures, whether the VAT was charged separately on an invoice or if it was charged initially when the invoices were first raised.
The first example is with the VAT charged separately – the flat rate percentage of 13.5% is applied to the gross amount of your invoices, so you multiply the gross by 0.865, and this gives you are up to date net figure. The reason we calculate this new up to date net figure is because when you pay VAT, you pay in line with your flat rate, so this calculation takes into account the actual VAT you will be paying across rather than the full 20%.
The second example is with the VAT charged initially – the 20% VAT is charged on top of the initial amount, giving us a net, VAT and gross amount. However, again the flat rate percentage of 13.5% is applied to the gross amount to calculate the new net amount that we need, and this new amount is used in place of the standard rate (20% VAT) net amount, for the same reason as mentioned above. "
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