Reply to: New VAT reg query

[northernladuk]

Correct, I change my laptop and phone for the latest Apple shaped version every 3 years

Doesn't it kill you being an apple owner with outdated kit for 2.5 years before you can get the latest kit?

[SlipTheJab]

how do you buy a 2k phone? Do you mean you get a single invoice for the phone and laptop and the total is over 2k?

Correct, I change my laptop and phone for the latest Apple shaped version every 3 years

[LondonManc]

Your payment for collecting VAT based on a £500/day contract:
14.5% - £13/day
15.5% - £7/day
16.5% - £1/day

Simple enough to figure out what's worth it. For those staying away/driving a lot, I'd imagine FRS isn't better.

[Lambert Simnel]

I will be registering for FRS but I wondered do I apply for the relevant rate as per normal (given the changes that are coming to FRS) and switch over later?

One point which hasn't been mentioned so far and which might affect your decision is that there has previously been a 1% reduction in your FRS rate in the first year of VAT registration. I believe that aspect is retained despite the other FRS changes announced in the Autumn Statement, though others may correct me on this.

[aardvark]

Very true. That's why I'm monitoring for the short term. My financial year isn't aligned to the tax year so the implementation in April won't have an immediate negative impact on MyCo.

I think this will "kick in" from your first vat return - you will need to determine what percentage to use for the previous quarter. It looks as if the figures are pro-rated for each vat period, so spending £2K once a year will only put you outside for the quarter(s) in which you have made the purchase - i.e. you'd need to spend £500 each quarter (on turnover < £100K) to stay outside for the whole year.

[TheCyclingProgrammer]

how do you buy a 2k phone? Do you mean you get a single invoice for the phone and laptop and the total is over 2k?

I think it's clear that's what he meant.

I guess another advantage of the standard scheme which we will get to enjoy is being able to reclaim VAT on all capital purchases. Possibly the biggest saving to be made there.

[yetanotherbob]

my purchase of a new laptop/phone every 3 years is over 2k anyway so I'll get the VAT back on that anyway

how do you buy a 2k phone? Do you mean you get a single invoice for the phone and laptop and the total is over 2k?

[ladymuck]

You're right, it's a simplified scheme, but one that was designed so people were not left worse off compared to being on the standard scheme.

The percentages were designed to recover your input VAT indirectly. The new percentage does not do that for any business whose expenses are mostly services.

If you spend more than £1k a year on VATable expenses on a £100k turnover you will already be making a loss compared to switching to the standard scheme.

Most IT contractors and freelancers will probably be spending this much in accountants fees alone.

Very true. That's why I'm monitoring for the short term. My financial year isn't aligned to the tax year so the implementation in April won't have an immediate negative impact on MyCo.

[TheCyclingProgrammer]

FRS is a simplification scheme, not a money making one. I'll be sticking with FRS, monitor things each quarter and see what impact there is.

You're right, it's a simplified scheme, but one that was designed so people were not left worse off compared to being on the standard scheme.

The percentages were designed to recover your input VAT indirectly. The new percentage does not do that for any business whose expenses are mostly services.

If you spend more than £1k a year on VATable expenses on a £100k turnover you will already be making a loss compared to switching to the standard scheme.

Most IT contractors and freelancers will probably be spending this much in accountants fees alone.

[ladymuck]

FRS is a simplification scheme, not a money making one. I'll be sticking with FRS, monitor things each quarter and see what impact there is.

[TheCyclingProgrammer]

But FRS will still be simpler to operate even with the new band ?

Simpler...yes. But not worth the loss I will be making on the FRS compared to the standard scheme. I'm annoyed about it but I will still be switching. Staying on the FRS I likely to cost me a couple of grand a year.

[TheCyclingProgrammer]

What are those on here intending to do?

Pending final legislation, deregister from the FRS. It's already a no-brainer to me, the new low cost rate wouldn't even cover the VAT on my accountancy fees.

[RonBW]

What are those on here intending to do?

I'll weigh up whether any additional cost is worth the hassle of doing normal VAT - if it's not worth it, then I won't bother.

[Lance]

But FRS will still be simpler to operate even with the new band ?

VAT returns are my accountants problem so no extra work for me.

[SueEllen]

But FRS will still be simpler to operate even with the new band ?

Depends on your contracts.