Thanks TheFaQQer
Hourly rate inclusive of VAT:-
£8.33+VAT=£10
£10-£1.35-CT=£6.92
Hourly rate exclusive of VAT:-
£10+VAT=£12
£12-£1.62-CT=£8.30
Looks like my accountant has got it wrong
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Reply to: Limted company on flat rate scheme
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Previously on "Limted company on flat rate scheme"
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Originally posted by Newbie Simon View PostThe agency has said it excludes VAT, they also take 10% so every £10 they make £1
You then pay £1.74 of that to HMRC, assuming you are on the FRS rate of 14.5%
So your company earns £10.26 per hour because of the FRS profit, and pays corporation tax on that, leaving you with £8.21 an hour.
If your rate is 13.5% (as you mention earlier), then you pay over £1.62 for each hour worked, have profit of £10.38 an hour, and after corporation tax are left with £8.304 an hour.
If you are clear to your accountant about your rate being exclusive of VAT, and they are doing it wrong, then you need to change your accountants quickly before anything else gets messed up.
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Originally posted by Newbie Simon View PostThe agency has said it excludes VAT, they also take 10% so every £10 they make £1
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The agency has said it excludes VAT, they also take 10% so every £10 they make £1
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Originally posted by Newbie Simon View PostLet's say I earn £10 per hour and worked 1000 hours total banked would be £10000 (gross) VAT is £1666.67 and net £8333.33.
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This might seem pedantic, but strictly speaking the £8650 is your gross profit (assuming no direct cost of sales) - you won't necessarily pay tax on all of this as you need to deduct your operating costs, which includes any input VAT if you are on the FRS.
If you want to look at a single invoice in isolation, you at least need to consider the costs attributable to that invoice and figure out your net profit. This could be your salary for the period the invoice covers, travel expenses etc.
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Originally posted by Newbie Simon View PostI am not sure my accountant is working my VAT return correctly.
Let's say I earn £10 per hour and worked 1000 hours total banked would be £10000 (gross) VAT is £1666.67 and net £8333.33.
£10000x13.5%=£1350
VAT flat rate profit=£316.67
Shouldn't it be VAT on £10k which is £2000-£1350=£650 for the VAT flat rate profit?
Rates are normally quoted as net + VAT.
YourCo sells your services at £8.33 per hour + VAT.
1000 hours x £8.33 + VAT
= £8,330 + £1,666
= £9,996 gross. (let's say £10k for simplicity)
Flat rate turnover is the gross amount, and say your scheme is at 13.5%:
£10,000 x 13.5%
= £1,350 VAT owed to HMRC.
Turnover for YourCo is: £8,330 + £1,666 - £1,350
= £8,650 (YourCo will pay 20% CT on this amount)
If YourCo was not on the FRS, it would still invoice £8,330 + VAT, but the whole £1,666 VAT would be owed to HMRC leaving YourCo with £8,330.
Hence £8,650 - £8,330 = £320 "flat rate profit".
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Originally posted by TheCyclingProgrammer View PostA spreadsheet?
Or stop being a cheapskate and get a FreeAgent, Xero, or Kashflow account (I'd recommend FreeAgent). It will cost you about one day's work.
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Originally posted by meridian View Postbut it is subject to Corp Tax as a taxable gain.
To calculate your net profit from the scheme, you need to deduct the cost of being on the scheme - your total input VAT which cannot be reclaimed (except on certain capital purchases).
Annual FRS surplus - annual input VAT = scheme net profit (or loss).Last edited by TheCyclingProgrammer; 6 March 2015, 01:57.
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Originally posted by stek View PostBest not to count VAT as a true tax, it's more like tax-collected, it was never yours. it was never part of your daily rate, not part of your income figure.
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Originally posted by Newbie Simon View PostI am not sure my accountant is working my VAT return correctly.
Let's say I earn £10 per hour and worked 1000 hours total banked would be £10000 (gross) VAT is £1666.67 and net £8333.33.
£10000x13.5%=£1350
VAT flat rate profit=£316.67
Shouldn't it be VAT on £10k which is £2000-£1350=£650 for the VAT flat rate profit?
Assuming that the £10k is VAT-inclusive, and assuming your Flat Rate is 13.5%, then your first example is correct. It's not "profit" in the true sense, but it is subject to Corp Tax as a taxable gain.
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I am not sure my accountant is working my VAT return correctly.
Let's say I earn £10 per hour and worked 1000 hours total banked would be £10000 (gross) VAT is £1666.67 and net £8333.33.
£10000x13.5%=£1350
VAT flat rate profit=£316.67
Shouldn't it be VAT on £10k which is £2000-£1350=£650 for the VAT flat rate profit?
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Newbie simon, if you want a spreadsheet to track your tax, PM me your email address and I'll send you one tomorrow. 15% of your gross probably isn't too far off the mark if you're a relatively low earner.
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Originally posted by stek View PostBest not to count VAT as a true tax, it's more like tax-collected, it was never yours. it was never part of your daily rate, not part of your income figure.
Leave a comment:
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