Reply to: Switching from FRS to Standard VAT

[TheCyclingProgrammer]

I make about £600 per VAT quarter at the minute as I'm on 13.5% but when it changes I'll only make about £35 per quarter which hardly seems worth it.

Also for me I have two cars on business lease which I currently can't claim any VAT on and if I make the switch to standard VAT I can reclaim 50% of that per car so it seems to benefit to me switch.

Don't think that because you've been on the FRS you haven't been able to recover the input VAT on your leases - that's what the surplus income on the FRS is designed to cover. If your quarterly input VAT has been exceeding what you've been making in FRS surplus, you should have considered moving on to the standard scheme sooner.

[TheCyclingProgrammer]

I thought all were going up to 16.5% ? That's the impression I got from reading this article https://www.gov.uk/government/public...technical-note

For many of us this will be the case but there will be exceptions.

[TheCyclingProgrammer]

I guess if shes an accountant she will be comfortable having two very different trades under the same VAT? Dunno if that's an issue or not.

The FRS does allow for trade that covers different sectors. IIRC you need to evaluate on a per VAT period basis which sector the majority of your income came from and use that percentage.

[SouthernManc78]

And, erm, if she's a trainee accountant why didn't you ask your wife?

I did ask her about original question at the beginning of the post but as she is a trainee she hasn't done that before either. She is going to ask the accountant who she works with but I'd thought I'd ask the fellow contractors on this forum for their experiences also

[northernladuk]

And, erm, if she's a trainee accountant why didn't you ask your wife?

[northernladuk]

Because of S,D & C? I haven't really thought about her IR35 status to be honest with her not being an IT contractor and all.

I'm assuming your suggesting if my ltd co gets investigated for me being an IT contractor even if they can't prove I'm inside IR35 they may go after her and declare her income as inside?

Doesn't matter what she does. We've seen Locums, Social Works, Oil and Gas people and all sorts on here. The guidance below doesn't mention any type of job, just the way they are engaged.

https://www.gov.uk/guidance/ir35-find-out-if-it-applies

It particularly states...

When you’re deciding if IR35 applies to a contract it’s important to establish what the underlying relationship (your employment status) is between you (the worker) and the client for each contract or engagement.

If shes in training and working for the practice it's clearly and employer/employee relationship so inside.

I am guessing here but I'd take a guess it's a contract of service. If it's not its a sham.

IR35 is applied on a contract by contract basis. They won't investigate your company, they will investigate your wife. That said I'd hate to be connected to a company as a contractor when the other person is being investigated. Might as well have a look at the other one while we are at it.

I guess if shes an accountant she will be comfortable having two very different trades under the same VAT? Dunno if that's an issue or not.

[SouthernManc78]

Isn't she inside IR35 then?

Because of S,D & C? I haven't really thought about her IR35 status to be honest with her not being an IT contractor and all.

I'm assuming your suggesting if my ltd co gets investigated for me being an IT contractor even if they can't prove I'm inside IR35 they may go after her and declare her income as inside?

[northernladuk]

My wife is an accountant in training and works for a small accountancy firm, she invoices them through our ltd company as her client so we have multiple income streams and of course she needs a company car for that [emoji3]

Isn't she inside IR35 then?

And a problem with your Vat code?

[SueEllen]

My wife is an accountant in training and works for a small accountancy firm, she invoices them through our ltd company as her client so we have multiple income streams and of course she needs a company car for that [emoji3]

I was just pointing out to the others that there are non-cynical reasons why posters do things.

[SouthernManc78]

There are a couple of contractors on here whose wives/partners are also contractors so use the same company.

My wife is an accountant in training and works for a small accountancy firm, she invoices them through our ltd company as her client so we have multiple income streams and of course she needs a company car for that [emoji3]

[SouthernManc78]

13.5% is Financial Services. You mean you are on 14.5% for Computer and IT consulting with a 1% discount for your first year?

Two cars? Interesting..... No company motorbike yet?

Yes first year discount which runs out in March. I didn't register for Vat at all until I was approaching the threshold in my 2nd year of trading.

No the motorbike is on the way soon when the weather warms up but will be a personal purchase as it's 100% going to be a weekend toy so no point trying to trick myself or the tax man it's anything else

[SueEllen]

the company secretary needs something to do the school run twice-daily office supplies shop in

There are a couple of contractors on here whose wives/partners are also contractors so use the same company.

[pr1]

13.5% is Financial Services. You mean you are on 14.5% for Computer and IT consulting with a 1% discount for your first year?

Two cars? Interesting..... No company motorbike yet?

the company secretary needs something to do the school run twice-daily office supplies shop in

[northernladuk]

13.5% is Financial Services. You mean you are on 14.5% for Computer and IT consulting with a 1% discount for your first year?

Two cars? Interesting..... No company motorbike yet?

[SouthernManc78]

Not made the switch yet but probably will be soon, pending final legislation confirmation.

If you've not been making much of a surplus on the FRS you might have been better off on the standard scheme anyway, depending on your levels of input VAT.

I'm still unsure whether I can switch mid-way through a VAT period, my accountant seems to think I can, so I'll probably have to use HMRC software to do my next VAT return as FreeAgent won't handle this.

I make about £600 per VAT quarter at the minute as I'm on 13.5% but when it changes I'll only make about £35 per quarter which hardly seems worth it.

Also for me I have two cars on business lease which I currently can't claim any VAT on and if I make the switch to standard VAT I can reclaim 50% of that per car so it seems to benefit to me switch.

I'll be writing to HMRC to advise then I want to switch and the end of my next quarter which will be end of Feb.