Reply to: Flat rate VAT - anyone dropped out of it now?

[vwdan]

Never been in it - always worked out better to be out with lots of expenses. Doesn't really had a huge amount of overhead - just have to be aware.

[SouthernHarrier]

Theoretically I left at the beginning of May (calculations showed we'd be making a ~£400 loss per year on FRS). Wrote to HMRC informing them of such but have heard nothing back. Advise from accountant is to assume we're now on standard anyway.

[DannyF1966]

I've been at my current gig more than two years so it's not worth it for me at the moment as I don't have any expenses of note. As and when I get a new contract somewhere else I'll re-evaluate the situation.

[TheCyclingProgrammer]

- you pay for some SaaS software from a non UK supplier. Put it to "Computer software" on FreeAgent and it will assume 20% VAT unless you manually change it. Typically an overseas supplier wouldn't charge you UK VAT.

Another common error I'm sure with this one (whether you're on the standard or FRS): you need to apply the reverse charge to this and the way to do that in FreeAgent is to mark the supply as "EC Services" (even if the supplier is not in the EC/EU).

Even more annoyingly, if you enter something as a Bill that requires the reverse charge, you need to ensure the bill contact has an EU country (even if they aren't in the EU) or it won't let you select EC services!

I'm baffled as to why FreeAgent have conflated the reverse charge with EC services reporting (I'm not even sure what the EC services reporting is for - it existed before they added reverse charge support) and they've pretty much done nothing to fix this in the last 3 years and they have no plans to fix this going forward either.

[SeanT]

Flat rate VAT - anyone dropped out of it now?

Agreed...but with FreeAgent automating so many things, unless you keep a close eye and where required override the "Auto VAT" it's easy to make mistakes. Common examples for many contractors:
- you pay for some SaaS software from a non UK supplier. Put it to "Computer software" on FreeAgent and it will assume 20% VAT unless you manually change it. Typically an overseas supplier wouldn't charge you UK VAT.
- you pay for parking. Put it to "Motor expenses" on FreeAgent and it will assume 20% VAT. Some car parks are VATable, some aren't.
Or a couple of potentially more significant value ones:
- you pay rent for some office space. Put it to "Rent" on FreeAgent and it will assume 20% VAT unless you manually change it. Commercial rent is sometimes VATable, sometimes not.
- you pay a subcontractor to do some of the work for you. Put it to "Subcontractor costs" on FreeAgent and it will assume 20% VAT unless you manually change it. Your subcontractor might be based overseas, or might be UK based but modest turnover and not VAT registered.

Basically there are quite a few situations (some of which are very common, not freak things only applying to 1%) where FreeAgent's defaults will get it wrong, even where you put it to a very sensible cost category. It is very easy to override this, but many people don't want the stress of having to remember to do it, to check the purchase invoices to see whether VAT is shown or not (and for small costs sometimes it's not shown even when VAT was incurred). If they don't take care, they could very easily reclaim VAT they never incurred, and potentially get in trouble for that. For this reason many people just want the easy life, stick on FRS, and you don't have to worry about any of that.

you mean I have to actually look at what I bung through as expenses?

[Maslins]

If you are using Freeagent (and probably most other bookkeeping software) there is very little additional work in moving from FRS to Standard. All you have to do is ensure the correct VAT code/VAT amount is entered on your expenses which can't take much time at all each time you look at your bookkeeping.

Agreed...but with FreeAgent automating so many things, unless you keep a close eye and where required override the "Auto VAT" it's easy to make mistakes. Common examples for many contractors:
- you pay for some SaaS software from a non UK supplier. Put it to "Computer software" on FreeAgent and it will assume 20% VAT unless you manually change it. Typically an overseas supplier wouldn't charge you UK VAT.
- you pay for parking. Put it to "Motor expenses" on FreeAgent and it will assume 20% VAT. Some car parks are VATable, some aren't.
Or a couple of potentially more significant value ones:
- you pay rent for some office space. Put it to "Rent" on FreeAgent and it will assume 20% VAT unless you manually change it. Commercial rent is sometimes VATable, sometimes not.
- you pay a subcontractor to do some of the work for you. Put it to "Subcontractor costs" on FreeAgent and it will assume 20% VAT unless you manually change it. Your subcontractor might be based overseas, or might be UK based but modest turnover and not VAT registered.

Basically there are quite a few situations (some of which are very common, not freak things only applying to 1%) where FreeAgent's defaults will get it wrong, even where you put it to a very sensible cost category. It is very easy to override this, but many people don't want the stress of having to remember to do it, to check the purchase invoices to see whether VAT is shown or not (and for small costs sometimes it's not shown even when VAT was incurred). If they don't take care, they could very easily reclaim VAT they never incurred, and potentially get in trouble for that. For this reason many people just want the easy life, stick on FRS, and you don't have to worry about any of that.

[ContrataxLtd]

If you are using Freeagent (and probably most other bookkeeping software) there is very little additional work in moving from FRS to Standard. All you have to do is ensure the correct VAT code/VAT amount is entered on your expenses which can't take much time at all each time you look at your bookkeeping.

Martin
Contratax Ltd

[northernladyuk]

To be honest, its is more hassle to drop flat rate for both contractor and accountant. It depends on the gain/hassle balance I suppose.

To be fair, my accountant (who is brill) has pointed out there is a slight £ advantage but has also pointed out there is more work. But up to me. Fair enough.

I just wondered what others were doing...

Your accountant must be a saint.

[TheCyclingProgrammer]

I left at the beginning of April. Hasn't been a problem.

[northernladuk]

I just wondered what others were doing...

We are doing whatever our accountant advises based on our individual circumstances. HTH BIDI.

[psychocandy]

To be honest, its is more hassle to drop flat rate for both contractor and accountant. It depends on the gain/hassle balance I suppose.

To be fair, my accountant (who is brill) has pointed out there is a slight £ advantage but has also pointed out there is more work. But up to me. Fair enough.

I just wondered what others were doing...

[Maslins]

Of our clients who were on the FRS, numbers are approx as below:
- half leaving the FRS,
- quarter staying on it (as like the simplicity and figured there wasn't much in it cash-wise)
- quarter haven't responded...and will either never notice, or in a few months be wondering why their VAT bills are creeping up.

[Pherlopolus]

I dropped the FRS earlier in the year, due to spending 300-400 a week on hotels/subsistence and doing about 300 miles a week.

If I was in a local contract I would have probably not bothered. I only bother to claim the vat back on big ticket items.

[ContrataxLtd]

I guess most accountants are saying, nah, stay in there's little to be gained. But they would say that I guess because there's more work involved for them.

So what has everyone done? Personally, money is money lol. When you're getting £73 a week at times it makes a difference!

If an accountant is advising to stay in just because it's more work for them then they really shouldn't be an accountant and I think that's a pretty stupid think to guess tbh. I know we looked at a comparison for each client individually, advised what was best in terms of tax efficient and then let the client decide (most left the scheme, some stayed in).

Martin
Contratax Ltd

[northernladuk]

You really need to stop guessing. Every single post now.