Reply to: Flat rate scheme - bank interest

[PhilAtBFCA]

Wjat happens if in a VAT accounting period you've had Credit and Debit interest - can you net one off against the other?

Also If you've ONLY had debit interest - do you deduct this from your turnover figure ?

Afterall, all your doing is having negative values in your calculation...

Hi Bluebird

The fact that you have paid interest to one party and earned interest from the same or another party makes no difference. Each is a separate "supply" for vat purposes.

Phil

[Bluebird]

Wjat happens if in a VAT accounting period you've had Credit and Debit interest - can you net one off against the other?

Also If you've ONLY had debit interest - do you deduct this from your turnover figure ?

Afterall, all your doing is having negative values in your calculation...

[AlanR]

VAT Error Threshold

Error reporting threshold is now £10k Linky. So any underpayment under this threshold you simply add to your next return.

[Moscow Mule]

I think you can self correct on the next one up to 2k anyway.

You certainly can.

Not positively sure if 2k is accurate, but I've no reason to doubt...

[ASB]

Would it be easier to file an amendment to a previous years VAT Return using Form 462 - Voluntary Disclosure of Errors on VAT Returns or just include the annual interest which wasnt accounted for on the next VAT Return?

I think you can self correct on the next one up to 2k anyway.

[Weltchy]

Would it be easier to file an amendment to a previous years VAT Return using Form 462 - Voluntary Disclosure of Errors on VAT Returns or just include the annual interest which wasnt accounted for on the next VAT Return?

[PhilAtBFCA]

FRS Bank Interest

I would imagine it is applicable since you have been on the VAT FRS and as such still liable for back VAT on the interest- happy for anybody to correct me.

Well I agree with you there, its not the rules that changed, the only change was the guidance given by HMRC.

Phil

[Weltchy]

Think i'll be sending my accountant an email about this to check.

[AlanR]

So I take it this only applies for sales made after April 2009 and is not retrospective?

I would imagine it is applicable since you have been on the VAT FRS and as such still liable for back VAT on the interest- happy for anybody to correct me.

[Weltchy]

So I take it this only applies for sales made after April 2009 and is not retrospective?

[Lewis]

So let me get this straight. VAT is now due on any interest that is paid into your Bank Account if all the interest has been generated from sales?

... and you have already paid VAT on those sales!

[Weltchy]

So let me get this straight. VAT is now due on any interest that is paid into your Bank Account if all the interest has been generated from sales?

[Lewis]

Hi Alan R

We had the same experience in trying to complete enough research to get to the bottom of the story. On ringing the helpline we had conflicting information, to their credit HMRC realised this was an issue and changed their VAT notices, although as you will see in the thread it was difficult to find the change.

The notice is very clear now, though, so there should be no misunderstanding, however there does seem to be some disbelief in that Bank interest is included, but I for one can understand that ! It does not change what appears to be a clear fact, according to HMRC website.

Lewis - On the subject of bank Interest - There is currently low or no interest on Cater Allen, and so we have started mentioning Scottish Widows to our clients on our blog - you can set up an account to move money in and out of your current business account, and the interest rates are very good when compared to others in the market. Its a small application form with no AMLR requirement so its easy to set up.

Phil

Thanks Phil, I'll take a look.

I've always thought that including bank interest is strange as why should a company with 100K in the bank pay more VAT than a company with 10K when they invoice the same? Afterall someone on the normal VAT scheme would pay the same VAT no matter what is in their bank account. In fact charging VAT on interest means you are effectively being double charged on invoice amounts. In fact more than double, you are being charge a small amount forever until you spend the money. Makes working out the true benfit of FRS difficult - hardly the simplification that it was intended to be. But then you come full circle in that rates are so low, you can sort of ignore the bank interest hit anyway. Just my thoughts ...

[PhilAtBFCA]

Bank Interest

Hi Alan R

We had the same experience in trying to complete enough research to get to the bottom of the story. On ringing the helpline we had conflicting information, to their credit HMRC realised this was an issue and changed their VAT notices, although as you will see in the thread it was difficult to find the change.

The notice is very clear now, though, so there should be no misunderstanding, however there does seem to be some disbelief in that Bank interest is included, but I for one can understand that ! It does not change what appears to be a clear fact, according to HMRC website.

Lewis - On the subject of bank Interest - There is currently low or no interest on Cater Allen, and so we have started mentioning Scottish Widows to our clients on our blog - you can set up an account to move money in and out of your current business account, and the interest rates are very good when compared to others in the market. Its a small application form with no AMLR requirement so its easy to set up.

Phil

[AlanR]

Lewis, if you're not sure about including bank interest then just give HMRC a quick call.

I rang the VAT Helpline probably 8 months ago to ask whether bank interest should be included when operating the VAT FRS, i was told that it is NOT included. My accountant disagrees with this and has recommended that i include it and having read the relevant VAT notices, i agree with him. Given the current interest rates its not going to be a great deal even when applied retrospectively but what chance do we have when even the Helpdesk get it wrong!

Alan