Flat Rate VAT Scheme

[Sally BFCA]

When you register for VAT you are automatically registered and the normal VAT scheme and have a choice of either cash accounting (pay the VAT over when your invoice has been paid) or standard accounting (pay the VAT over regardless of whether the invoice has been paid.

As it has been pointed out, you are best not to register for the FRS straight away, if you have any set up costs including VAT.

It only takes a phone call to your VAT office to change schemes.

Good luck!

[malvolio]

Sigh...

One doesn't like to blow one's own trumpet, but perhaps this following link may help. There's probably a few other relevant ones on that site to read as well...

<snip>

That said, since you clearly don't know how much you don't know (for example, your pay back rate is 10.5% for now), I also recommend you get an accountant before you make too many mistakes.

And incidentally, the point of contracting is not "expenses". They are basically revenue neutral; if they're not, you're doing it wrong.

[Moscow Mule]

Handy hint: You decide when you go on the flat rate scheme.

I would suggest that if you have large start up costs (eg laptop, screen, web server, whatever) that you buy these whilst not on FRS.

[notforgoogle]

Thanks for the quick response - an example:

Net profits (after expenses etc) are £100,000 (a nice round number)
Corporation tax would be charged at 21% on this so I would be due to pay £21,000 in taxes...

But if I claimed say £10,000 in total expenses then the tax I would be liable to pay would be £100,000 - £10,000 = £90,000.

I would now have to pay 21% on the £90,000 and not on the £100,000...

This would be a saving of: £1100

1) Does this seem correct?
2) When I go to buy something for the company e.g. laptop what is the saving that I am getting (not claiming the VAT as on the flat rate scheme) - I guess its a saving of 21%?

[chef]

i'll be quite polite as it's late and im about to goto the pub,

if your new to contracting you need an accountant asap to make sure your running the most profitable way and your legal for all matters tax etc.

when you have an accountant you ask your original question in your first contact and they will be more than happy to explain it to you as that's what you pay them for and it's their job.

your accountancy fee's are legitimate business expenses and you'll almost certainly need one to do your end of year accounts, vat returns, annual returns etc. if it's all new to you and your asking basic questions like expenses and flat rate vat

OR

you could research yourself via the host of guides ----------->

OR

you could trust your companies financial well being on what some anonymous people say on a forum

no offense is meant, but it just makes sense, get an accountant.. now

[Peoplesoft bloke]

Legitimate business expenses can be offset against Corporation Tax so it is worth claiming. The FRS can be a bonus if a high proportion of expenses aren't subject to VAT eg trains taxis. IIRC you can still reclaim VAT on some capital items over 2k . I am not an accountant etc

[notforgoogle]

Am new to contracting to forgive me for asking basic questions

I am going to be going onto the flat rate VAT scheme and understood this to mean:

when I claim an expense I will not be claming the VAT portion of the expense. However due to giving this portion up I will be paying approx 11.5% (instead of the current 15%) back to the revenue rather then 15%...

Is this a correct understanding?

Also does this mean that claiming expenses means that I am not longer getting any benefit as I will not be saving the VAT on the item?

Thanks for any help.