Reply to: VAT Flat Rate Scheme Update

[TheCyclingProgrammer]

I thought the point was you didn't switch, existing FRS members just pay each quarter's VAT at the correct rate based on whether you meet the LCT/FRS rules - I was rather assuming there was a new check-box on VAT returns or something?

You're right, but I doubt there's a checkbox. You just apply the appropriate percentage and keep a record of what you used.

[d000hg]

I'm getting square-eyed looking through this thread so forgive me if it has been posted but can anyone enlighten me how to switch to the new 16.5% FRS scheme from the previous 14.5% FRS scheme?

You tell your accountant

I thought the point was you didn't switch, existing FRS members just pay each quarter's VAT at the correct rate based on whether you meet the LCT/FRS rules - I was rather assuming there was a new check-box on VAT returns or something?

[TheCyclingProgrammer]

Finally got around to contacting the VAT department to check my request had been actioned. It has, but they are currently having delays in sending out confirmations (not really surprising). They also confirmed to me that I simply account for Feb/Mar on the FRS and April on the standard scheme and combine the figures in my next VAT return.

If you want to ring up and check, when you go through the annoying voice recognition menu system, don't specify that you're cancelling the FRS as it will just tell you that you can't do it on the phone and hang up - specify "other".

[TheCyclingProgrammer]

I may be wrong but as I understood you can't stop using the FRS during a VAT period. But you can have 2 different flat rates within a return. Unfortunately Freeagent hasn't managed to figure out how to add the 2 sets of figures together and those using Freeagent will need to file April and May returns with different flat rates using good old HMRC online.

You can stop using the FRS mid period.

You'll need to split your return periods in FreeAgent to generate the right numbers and add them together and submit your return using the HMRC portal. You'll then be able to continue using FreeAgent to submit your returns.

[concord]

Tomorrow is the last day to make a decision on leaving the FRS for this quarter.

A lot of people mentioned that there is more paperwork to do using the "normal" scheme. My company uses an app to manage its books and I already enter all expenses into the system. It seems like all I need to do is make a few changes to the system's settings and pay more attention to the VAT rate when inputting expenses.

Is there something I'm missing? Is the hardest part classifying each expense?

Thanks.

[Andrew@Wisteria]

Hi

You are formally required to write to HMRC to notify them that you are leaving the scheme. They will normally write back to you to confirm your leaving date. If you stop using the scheme in the middle of a VAT period, you will need to split your calculations into two to cover FRS and Standard Scheme, the figures are added together for your vat return.

Also, if you used the cash-based turnover method when under the Flat Rate Scheme, you will need to switch to invoice basis on your final Flat Rate Scheme VAT return and include all your supplies invoiced where the payment is not yet received, unless you switch to the cash accounting immediately after you leave the flat rate scheme (cash accounting is separate from the Flat Rate cash based method used for your vat calculations specifically).

In addition, if you receive payments before 1 April 2017 that relates to services after this date, you will need to apportion the sales figures to be included into the relevant VAT return period.

I hope this helps.

I may be wrong but as I understood you can't stop using the FRS during a VAT period. But you can have 2 different flat rates within a return. Unfortunately Freeagent hasn't managed to figure out how to add the 2 sets of figures together and those using Freeagent will need to file April and May returns with different flat rates using good old HMRC online.

[Michael at BI Accountancy]

I'm getting square-eyed looking through this thread so forgive me if it has been posted but can anyone enlighten me how to switch to the new 16.5% FRS scheme from the previous 14.5% FRS scheme?

You simply calculate whether the VAT quarter falls within the new rate and if so use the new 16.5% when it comes to preparing and submitting your VAT return.

If you are on FreeAgent I believe they now have a Limited cost trader category.

[northernladuk]

You tell your accountant

[DesDixon]

I'm getting square-eyed looking through this thread so forgive me if it has been posted but can anyone enlighten me how to switch to the new 16.5% FRS scheme from the previous 14.5% FRS scheme?

[concord]

@Chart Accountancy

Thank you very much for the clear reply!

[Chart Accountancy]

Leaving FRS

My company's current VAT period ends on 31 March. I'd like to confirm my thinking based on that last few replies: If I email [email protected] on 30 March indicating I'd like to switch the business into the "normal" VAT cash accounting scheme effective 1 April 2017, can I start right away and don't need a reply?

Finally, for services the business provided in March and invoiced on say, 1 April, would they fall under the "normal" (ie non-FRS) scheme? I'd be using cash accounting so I'd assume that's the case.

This article says:



It says can so does that mean I can just use the "normal scheme" (ie non-FRS) instead to make things simple in my accounting software?

Thanks.

Hi,

You can start accounting under the Standard Scheme from 1st April, you don't need to wait to receive the confirmation as long as you keep a proof that you sent your notification of leaving the scheme to HMRC. By the time your VAT return is due for filing you should receive the HMRC' confirmation, if not contact them before you file your return to ensure they have a record for your company's effect e date of leaving the scheme.

The VAT is accounted for in the Vat quarter based on the tax point, this is normally the date of the invoice if issued within 14 days of providing the service or the date you receive your payment if on cash accounting. Therefore, either way the invoice you will raise on 1 April will be under the standard scheme for VAT.

[concord]

We actually just had a telephone conversation about it and he recommended the business switches to the "normal" scheme. With the help of my accounting software, I handle my own VAT. I thought I would ask here since their office is closed now and I don't want to be really annoying. Plus, I know this is a hot topic here.

I can call back tomorrow if no one knows.

Thanks.

[northernladuk]

Not using an accountant?

[concord]

My company's current VAT period ends on 31 March. I'd like to confirm my thinking based on that last few replies: If I email [email protected] on 30 March indicating I'd like to switch the business into the "normal" VAT cash accounting scheme effective 1 April 2017, can I start right away and don't need a reply?

Finally, for services the business provided in March and invoiced on say, 1 April, would they fall under the "normal" (ie non-FRS) scheme? I'd be using cash accounting so I'd assume that's the case.

This article says:

If the business has been using the cash-based accounting method under the FRS, and immediately starts to use ‘normal’ cash accounting, it is permitted on receipt of the money to account for FRS VAT at the rate when the supply was made. So a receipt in April can be accounted for at 12%, even if the business would be an LCT and has gone back to standard accounting (Notice 733 paragraph 9.6). If it does not start to use cash accounting, it has to bring its debtors into account using the appropriate FRS rate on 31 March.

It says can so does that mean I can just use the "normal scheme" (ie non-FRS) instead to make things simple in my accounting software?

Thanks.

[Chart Accountancy]

Leaving the FRS

Ran this past my accountant and he recommended still giving them a ring to confirm they received my letter just in case.

Hi

You are formally required to write to HMRC to notify them that you are leaving the scheme. They will normally write back to you to confirm your leaving date. If you stop using the scheme in the middle of a VAT period, you will need to split your calculations into two to cover FRS and Standard Scheme, the figures are added together for your vat return.

Also, if you used the cash-based turnover method when under the Flat Rate Scheme, you will need to switch to invoice basis on your final Flat Rate Scheme VAT return and include all your supplies invoiced where the payment is not yet received, unless you switch to the cash accounting immediately after you leave the flat rate scheme (cash accounting is separate from the Flat Rate cash based method used for your vat calculations specifically).

In addition, if you receive payments before 1 April 2017 that relates to services after this date, you will need to apportion the sales figures to be included into the relevant VAT return period.

I hope this helps.