Reply to: Which VAT scheme should I register?

[Viktor]

Given that hourly rate would be quoted net of VAT I would suggest...

Billed to client = 70,000 + VAT = 82,250
Flat rate of 12% on VAT *INCLUSIVE* turnover = 82,250 * 12% = 9,870
Diff between VAT billed to client and VAT sent to tax man = 12,250-9,870 = 2380
Corp Tax of 19% on "profit" = 452.20
Extra in your bank account = 2380-452.20 = 1927.80

(The above, of course, assumes no expenses on which VAT would be recooverable if flat rate not used)

Anyway it's the same thing. The NET profit out of this would be 2,34 % of your VAT inclusive turnover...

[DaveB]

This implies that for revenue of (70,000 + VAT = 82,250), You have to buy £11,016 (i.e 1927.8/17.5%)worth of allowable company expenditure for the Flat rate Scheme not to be worthwhile !

css_jay99

Yep, unless you are a reseller of goods or services being charged large amounts of VAT by your suppliers the FRS is definately your best bet.

Remeber as well that you can still claim VAT back on capital purchases over £2000.

[css_jay99]

Given that hourly rate would be quoted net of VAT I would suggest...

Billed to client = 70,000 + VAT = 82,250
Flat rate of 12% on VAT *INCLUSIVE* turnover = 82,250 * 12% = 9,870
Diff between VAT billed to client and VAT sent to tax man = 12,250-9,870 = 2380
Corp Tax of 19% on "profit" = 452.20
Extra in your bank account = 2380-452.20 = 1927.80

(The above, of course, assumes no expenses on which VAT would be recooverable if flat rate not used)

This implies that for revenue of (70,000 + VAT = 82,250), You have to buy £11,016 (i.e 1927.8/17.5%)worth of allowable company expenditure for the Flat rate Scheme not to be worthwhile !

css_jay99

[martinb]

Are you sure?

Wrong Monkey,

you pay 12% out of your gross turnover, including VAT, so you end up with

VAT paid = 70.000 * 12% = 8400
VAT collected = 70.000 - 70.000/1.175 = 10.426

Profit = 10.426 - 8400 = 2026 - CT = 1641 dosh in pocket

RESULT

Given that hourly rate would be quoted net of VAT I would suggest...

Billed to client = 70,000 + VAT = 82,250
Flat rate of 12% on VAT *INCLUSIVE* turnover = 82,250 * 12% = 9,870
Diff between VAT billed to client and VAT sent to tax man = 12,250-9,870 = 2380
Corp Tax of 19% on "profit" = 452.20
Extra in your bank account = 2380-452.20 = 1927.80

(The above, of course, assumes no expenses on which VAT would be recooverable if flat rate not used)

[Viktor]

Yes, you pay CT - it's still free money though. In the first year, if you're getting, say, 350/day and working 200 days/year, you end up with

70,000 * 5% = 3,500 extra profit
minus 19% CT = 665

net result = 2,835 more cash in the company than you would have received otherwise. Result

Wrong Monkey,

you pay 12% out of your gross turnover, including VAT, so you end up with

VAT paid = 70.000 * 12% = 8400
VAT collected = 70.000 - 70.000/1.175 = 10.426

Profit = 10.426 - 8400 = 2026 - CT = 1641 dosh in pocket

RESULT

[XLMonkey]

Yes, you pay CT - it's still free money though. In the first year, if you're getting, say, 350/day and working 200 days/year, you end up with

70,000 * 5% = 3,500 extra profit
minus 19% CT = 665

net result = 2,835 more cash in the company than you would have received otherwise. Result

[DaveB]

Quote:
Originally Posted by MrsGoof
You charge customer £1000 + £175 VAT total £1175

When you come to pay VAT on the flat rate scheme you pay 13% of the gross = £152.75

enroute you have just pocketed the difference between VAT charged and VAT paid £22.25

SO multiply it up to say £10k then its £222.5 for doing nowt.

Do you then have to pay CT on the difference ?

Yes, it becomes part of your companies gross profits.

And check the categories within the FRS. Depending on the work you do you can get it down to 10% for the first year.

[Pondlife]

Pretty sure you do.

[css_jay99]

Do you then have to pay CT on the difference ?

thats a good point !, any ideas ?

[css_jay99]

cheeky sods !

[Gold Dalek]

i registered for VAT in January, but did not claim VAT from my client until May due to no response from VAT People until last month. do i just submit returns for when i claimed regardlesss of registration ?

You are in trouble...VAT people will say you should have attached "VAT number applied for" to the top of your invoices and claimed VAT straight away

They will wait a year (to allow the interest to accrue) then expect a visit to assess you as having missed your payments for 2 quarters

Interest will be compounded ...

[Pondlife]

You charge customer £1000 + £175 VAT total £1175

When you come to pay VAT on the flat rate scheme you pay 13% of the gross = £152.75

enroute you have just pocketed the difference between VAT charged and VAT paid £22.25

SO multiply it up to say £10k then its £222.5 for doing nowt.

Do you then have to pay CT on the difference ?

[MrsGoof]

You charge customer £1000 + £175 VAT total £1175

When you come to pay VAT on the flat rate scheme you pay 13% of the gross = £152.75

enroute you have just pocketed the difference between VAT charged and VAT paid £22.25

SO multiply it up to say £10k then its £222.5 for doing nowt.

[css_jay99]

I am just having a look at the IR site on VAT apart from the 1st Year, the Flat rate scheme is of absolutely no use if i cant claim anything back. I mean other than having to do the VAT man's job for him, I dont get nothing back in return for my effort.

Am I missing something here ?

Do I charge Agency 17.5% and then give IR 13.0% ?


Cheers

[sugsy]

i registered for VAT in January, but did not claim VAT from my client until May due to no response from VAT People until last month. do i just submit returns for when i claimed regardlesss of registration ?