Reply to: VAT on mileage (fuel scale charge)

[freshblue]

Cheers chaps...

[partimer]

ok

As per usual with these things, they get tweaked every budget so I happily admit to my mistakes. Best advice is to always research the current rules

I'm waiting for when Fatboy Clown tweaks the rules so that Zero Rate VAT is only available to "genuine businesses" and comes knocking for back payments ...

Just look at the double U-turn on the tax breaks for the film industry.

[DaveB]

Actually according to HMRC its your first 12 months of registration. So if you've never been registered in the 3 months above you can still have all 12.

Also as we've covered a few times, if you ever have to sub-contract any work or get the services of another consultant that you have to pay via their invoices you can't claim back the VAT as this is a service and the reclaim option for values over 2000 only applies to goods.

You can opt of the scheme at any time and rejoin later, although you do have to wait 12 months before re-applying.

If you are going to start getting large VAT inclusive invoices it may work out better to leave the scheme and come back again in 12 months.

IANAA, YMMV.

[boredsenseless]

To clarify, the 12 percent is only available if you are in your first 12 months of trading i.e. if you've been going for longer than 12 months like most of us, you don't get the 1 percent discount.

So if you've been trading for 3 months you can only get 1 percent discount for 9 months. Read it all at the HM Customs site.

Actually according to HMRC its your first 12 months of registration. So if you've never been registered in the 3 months above you can still have all 12.

Also as we've covered a few times, if you ever have to sub-contract any work or get the services of another consultant that you have to pay via their invoices you can't claim back the VAT as this is a service and the reclaim option for values over 2000 only applies to goods.

[DaveB]

To clarify, the 12 percent is only available if you are in your first 12 months of trading i.e. if you've been going for longer than 12 months like most of us, you don't get the 1 percent discount.

So if you've been trading for 3 months you can only get 1 percent discount for 9 months. Read it all at the HM Customs site.

And this is why I'm not an accountant

[partimer]

clarify

To clarify, the 12 percent is only available if you are in your first 12 months of trading i.e. if you've been going for longer than 12 months like most of us, you don't get the 1 percent discount.

So if you've been trading for 3 months you can only get 1 percent discount for 9 months. Read it all at the HM Customs site.

[DaveB]

check the example in your link.

you actually pay the VAT man

12% * £11750

not

12% * £10000

still looks good to me.

Yeah, my mistake

As you say though, still a good move.

[SameOldStory]

As in VAT.

The basic idea is that you register for a flat rate of VAT that you pay to the tax man, anywhere from 6-13 % depending on how your company gets classified. You still charge your customers the full 17.5% but only pass on the flat rate value to the VAT man.

So if your flat rate is 12% on a £10000 invoice you charge :

17.5% VAT * £10,000 = £1750 which gives £11750 total.

You then pay the VAT man

12% * £10000 = £1200

and you get to keep the extra £550.


more info <removed>

plus links to HMRC website for the full details and application form.

check the example in your link.

you actually pay the VAT man

12% * £11750

not

12% * £10000

still looks good to me.

[DaveB]

Flat rate as in VAT or mileage?

As in VAT.

The basic idea is that you register for a flat rate of VAT that you pay to the tax man, anywhere from 6-13 % depending on how your company gets classified. You still charge your customers the full 17.5% but only pass on the flat rate value to the VAT man.

So if your flat rate is 12% on a £10000 invoice you charge :

17.5% VAT * £10,000 = £1750 which gives £11750 total.

You then pay the VAT man

12% * £10000 = £1200

and you get to keep the extra £550.

The down side is that you can no longer claim the VAT on your VAT'able expenses such as travel etc. As long as these are less than 10% of your turnover then you should still be ahead of the game and there is no need to keep VAT reciepts / accounts for your expenses etc.

If you decide to buy summat that costs more than the £2000 capital limit then you can still claim back the full 17.5%.

It will save me around £400 pm on avaerage.

As an added incentive you get an additional 1% discount on your VAT rate for the first 12 months after you sign up for the scheme as well.

more info <removed>

plus links to HMRC website for the full details and application form.

[ladymuck]

Flat rate as in VAT or mileage?

Why not both? It's all rather tedious that your mileage rate drops after x number of miles - your outlay and wear and tear on the vehicle doesn't change, so why should the mileage rate?

[freshblue]

Flat rate as in VAT or mileage?

[DaveB]

Why not just go flat rate? No messing about with VAT reciepts etc and you save money in the process, assuming you dont have huge vatable expenses.

[tim123]

My accountant has advised me that if I want to keep claiming the VAT elements of the mileage scheme then I have to start keeping VAT receipts for fuel. Seems the good old EEC have introduced some law and this is is the UK get out! I still get the 40p/25p for using my car so I only lose out by reducing my VAT bill. Amounts to not much (17.5% of the 12p per mile) overall but I hate handing over more than I need to the HMCR!

Anyone else had same advice? Came into effect 1/1/06.

A Dutch company lost a claim in the European Court several years ago. The Court rulled that companies could not reclaim VAT on expenses incurred by their employees, unless the receipt was in the company name.

This result cause some consternation (I had to check that I got that right to avoid Fleety correcting my spelling!) in several countries and there were various attemps to avoid it's implementation.

This new rule is a much delayed and waterer-down result of that legal rulling.

tim

[freshblue]

Ta. Will post any relevant feedback

[Rebecca Loos]

Ask for advice there