Reply to: VAT Flat Rate Scheme Category

[handyandy]

The simple way to look at this is what would you be paying (NET) in VAT if there was no such thing as FRS?

If you buy lots of goods or services that have VAT charged on them in order to deliver your own goods and services to your client then you should be on a lower rate FRS category. If you don;t then you should be on a higher one.

E.G. 1 - Fred provides services via FredCo LTD to a client and this involves FredCo buying servers and software with Fred builds and configures and then instals for the client. If FredCo was not on FRS then all the VAT that it pays on these purchases could be offset from the VAT that FredCo invoices the client for (which would normally be passed straight through). If FredCo also needs to rent a small industrial unit and pay for electricity etc. so Fred has a place to build those servers in then FredCo can offset that too. If FredCo needs to get UPS or FEDEX to transport those built servers from the industrial unit to the clients data centre then the VAT on the invoice can be offset too. FredCo invoices the client for Freds time and for all the above elements with VAT added and clearly itemised.

E.G. 2 - Fred provides services via FredCo LTD to a client and this involves Fred turning up at the clients data centre each day and building servers that the client has bought using software the client has bought. The client has a well equipped room in which this can be done and all the tools and equipment are provided. FredCo invoices the client for Fred's services based on his day rate with VAT added.

In example 1 FredCo may want to register for FRS but if it did then it should make sure that it's worth while as it may be better to not register and keep full VAT records so reclaims can be made against actual expenditure (the technical terminology talks about input and output VAT but I'll leave that for an accountant to explain). If FredCo did register for FRS the category should reflect a rate that would be relatively low.

In example 2 FredCo should almost certainly register for FRS as there is very little VATable expenditure (input) whilst the VAT on the invoices (output) is fairly predictable.


In summary - Even if you are on 14.5% then you are getting to keep some of the VAT simply for collecting the tax from your client. Don't get greedy you may just get thrown off FRS and then have a lot of extra paperwork to do and you'll pay close on to the full VAT you collect from your client straight to the VAT man.

[Plurs]

OK, I'll try another way, who is deciding / providing expertise on the way the configuration is done? If you are being told, step by step, how it is to be done, then I understand your confusion.
Usually a contractor provides specialist knowledge, or expertise, if that's not you I apologise.

Yes but if the construction company subcontracted out elements of the work it would still need to follow the specifications wouldn't it.. i.e. they are not the ones planning it, there would be smaller elements of planning involved but I would not constitute these as meaning they are the one's who planned it. Either way this is well off topic, I've got my answer now, thanks

[MrMarkyMark]

Does documenting something mean you've planned it? So every bricklayer who's counted the amount of bricks he's used is now an architect... thanks for that I'm not confused any more.

OK, I'll try another way, who is deciding / providing expertise on the way the configuration is done? If you are being told, step by step, how it is to be done, then I understand your confusion.
Usually a contractor provides specialist knowledge, or expertise, if that's not you I apologise.

[Plurs]

So you don't plan, document, or state what you are going to configure?
Strange, because I always have

Does documenting something mean you've planned it? So every bricklayer who's counted the amount of bricks he's used is now an architect... thanks for that I'm not confused any more.

[MrMarkyMark]

It was when registering for VAT and having to complete the most relevant categories for SIC 2007 that I realised that that their definition of IT Consultancy is that of someone who plans systems, which made me go back and rethink what I had selected before.


Anyway....

So you don't plan, document, or state what you are going to configure?
Strange, because I always have

[Plurs]

Worth bearing in mind that the point of the FRS is to simplify your book-keeping not save you a couple of quid. The argument could be made that it's fulfilled its remit even if you are on a higher rate than you should be.

That's exactly why I want to use the FRS, I'm not fussed about 2.5% like everyone seems to think... just don't want to choose the wrong category! Thanks for your reply.

[Alan @ BroomeAffinity]

Worth bearing in mind that the point of the FRS is to simplify your book-keeping not save you a couple of quid. The argument could be made that it's fulfilled its remit even if you are on a higher rate than you should be.

[Plurs]

OK, If "'Any other activity that is not listed elsewhere" was the higher % would you have been "over thinking" it then?

Just sayin'

It was when registering for VAT and having to complete the most relevant categories for SIC 2007 that I realised that that their definition of IT Consultancy is that of someone who plans systems, which made me go back and rethink what I had selected before.

Anyway....

[northernladuk]

pinged him a mail but he's away for a few days.

my fault totally as I insisted on the particular FRS banding but after reading it online, I could be a in a better category.

anyway, anyone know the process? VAT helpline is busy, so going to try later in the day..

IMO just let him deal with it. You've already ****ed up trying to lead off with something you know nothing about and you appear to be wanting to carry on the sorry story. Indicate your preference to your accountant, apologise and admit he was right and then let him deal with it. You have a professional on board so you don't cock up, you have and you still don't want to let the professional deal with it...

You haven't got an accountant have you really??

[ContractorBanking]

Wouldn't your accountant be able to sort this out for you? That said why didn't they spot it?

pinged him a mail but he's away for a few days.

my fault totally as I insisted on the particular FRS banding but after reading it online, I could be a in a better category.

anyway, anyone know the process? VAT helpline is busy, so going to try later in the day..

[northernladuk]

Wouldn't your accountant be able to sort this out for you? That said why didn't they spot it?

[ContractorBanking]

How easy is it to change FRS categories and how do I go about it?

Just realised should be in another category after reading it online.

Does it take time?

[MrMarkyMark]

Thanks for assuming I'm after the extra 2.5% but I'm actually trying to choose the right category so I don't get into trouble later on... don't be so skeptical... anyway thanks for the advice, guess I was right the first time before I started over thinking it.

OK, If "'Any other activity that is not listed elsewhere" was the higher % would you have been "over thinking" it then?

Just sayin'

[FrontEnder]

Thanks for assuming I'm after the extra 2.5% but I'm actually trying to choose the right category so I don't get into trouble later on... don't be so skeptical... anyway thanks for the advice, guess I was right the first time before I started over thinking it.

You're never going to get into trouble by paying more than necessary.

[pr1]

Thanks for assuming I'm after the extra 2.5% but I'm actually trying to choose the right category so I don't get into trouble later on... don't be so skeptical... anyway thanks for the advice, guess I was right the first time before I started over thinking it.

if you want to minimise the risk of getting in trouble later on choose the highest %