Reply to: VAT flat rate scheme - good option?

[planetit]

Just download the form from here fill it in and post it back. You used to be able to email it back, but email is old hat. The moden way to comunicate is through the post.

[boredsenseless]

Phone HMRC they send a form. You fill it in, They say Yes or No. Simple As

[Mustang]

How?

How do you claim for the flat rate? Is it simply a case of phoning HMRC and saying you want to register? I suspect knowing NL it is more complicated than that.....!! I have bought all my major purchases now for the company so it's probably a good time to swicth to the flat rate.

[luke warm]

good points boredsenseless

[boredsenseless]

Oh and depending on who you invoice some big institutions won't deal with you without a VAT number.

Not because they can't but because one of their procurement questions is what is your VAT number, and you'll cause all sorts of brain malfunctions in their little heads if you say you haven't got one.

Also not being regsistered draws attention to the fact that you are small-fry since everyone knows you have to be if you invoice over 58K

Incidentally I think it might be 60K now

[boredsenseless]

When starting out you don't have to VAT register till you reach the 58K threshold IIUC.
So is there any advantage to staying outside the VAT scheme for as long as possible? A friend of mine thinks I should stay out of it. I feel that as I think I will benefit from the flat rate scheme I should apply to be VAT registered as soon as I start contracting.

Thanks from a newbie...

It depends - do you hold a contract that is worth 58K (or combined with others you have done will do so)? If you do even if it is monthly billing and it will take 6 months to get there you have to register since the registration is required when you KNOW you will exceed the limit not WHEN you do. Therefore if you have a 3 month contract in your hand that can get you 30000 and you have invoiced 35000 already this year you should apply for VAT at the point you sign your new contract as you now KNOW you will exceed the threshold.

[luke warm]

Any advantages to staying outside VAT for ALAP?

When starting out you don't have to VAT register till you reach the 58K threshold IIUC.
So is there any advantage to staying outside the VAT scheme for as long as possible? A friend of mine thinks I should stay out of it. I feel that as I think I will benefit from the flat rate scheme I should apply to be VAT registered as soon as I start contracting.

Thanks from a newbie...

[Lucifer Box]

It's quite straightforward. Your supplier charges you VAT on £7k, which you pay to them and then claim it back from HMCR. You charge your customer VAT on £10k, which you pass on to HMCR. The clue is in the name... "value added" tax, it being a tax on the value added (in this case by you).

If your accountant doesn't understand how VAT works, get a new one.

[ChrisC]

Sort of Understand - Licenses

Thanks for the advice guys - sounds not so good - was missold this by my accountant as being an easy way to make money.

I get a discount - say 30% from list price so say I sold something to the customer for 10000 pounds - I could buy them for 7000 pounds leaving 3000 pounds profit. Would I be forced to pay VAT only on the 3000 pounds profit?

[jonhaff]

Yes id say in most cases a standard contractor (say one invoice a month with only travel and minor other expenses) is better off doing the flat rate.
I make 650+ per quarter. Thats over a days work for nothing, i treat this as a way of getting back some of the tax we overpay to start with !

So my advice is do it!

Beware though in most cases (friends and family) expect to get a VAT investigation to make sure you were appliying VAT correctly to start with. (this is NOT IR35 or IR related issues purely a VAT investigation).
If you arnt hiding anything then you have nothing to worry about they are very nice people. In fact they offered advice about things I hadnt thought of claiming so it was evern more useful.

[XLMonkey]

If you charge vat at 17.5% and pay the VAT at 13% is the difference seen as income and then subject to tax?

Mike

it is treated as a gain to your company, so it will be subject to corporation tax at c. 19% along with all the other declared profits.

[boredsenseless]

I operate this method - I also resell licenses for IBM - usually well over 2k but sometimes under it too - what would I do there?

You are providing a service to the client of procuring and sourcing the licenses, a by product of this service is that they end up with a license.

Unless you agree with IBM to do a pass-thru license deal (i.e. where you get no markup) it is a service and therefore you charge VAT on the service.

Services can't be reclaimed under the flat rate scheme. After speaking to HMRC this was the single biggest reason for me leaving the scheme as I often resell licenses with a large markup included.

[boredsenseless]

Supposing I spent £3k on 5 day boot camp, would I be able to reclaim the VAT on it?

I'm also on the flat rate VAT scheme.

Cheers

Depends on the invoice you receive. If its x per day then its a service. If its a fixed amount for a product (i.e. the manual and instruction) then you may be able to argue its goods.

However depending on how much you invoice it may still beneficial overall to be on the flat rate scheme and just absorb this VAT in the 4.5% you retain.

[handsfree]

Do courses count as goods or services?

Supposing I spent £3k on 5 day boot camp, would I be able to reclaim the VAT on it?

I'm also on the flat rate VAT scheme.

Cheers

[ChrisC]

What about being license

I operate this method - I also resell licenses for IBM - usually well over 2k but sometimes under it too - what would I do there?