Reply to: VAT question

[Euro-commuter]

I would be better off outside the FRS, maybe you wouldnt.

No-one disagreed with that, they disagreed with where you said "you lose the chance to claim expenses".

And you DID say that, and it IS bollocks.

[Swamp Thing]

However, that is not all saving, the balance goes against gross profits, so you pay 19/20/21/22% (delete as applicable) against it.

Ohhh alright then Malvolio. So to take my example of £2,225 in your pocket, this becomes £1,780 in the 2007-08 corporation tax year. It’s still £1.7K! HMRC robs from us any way it can; we owe it to ourselves to mitigate, goddammit!! (I’m still fuming from Gordo’s latest budget).

[Ruprect]

No he isnt correct, Denny has hit the nail on the head though.

I would be better off ouside the FRS, maybe you wouldnt.

As for you Ruprect, would it be possible for you to make your point to me without the insults. Pretty please

EO, I don't believe I insulted you, just pointed out that what you said was balls.

HTH

[gingerjedi]

You are all missing the point of registering for VAT.

By registering you are actually signing up as an employee of Gordon Brown and declaring that you will act as his agent in the collection of tax from your customers.

Don't sign up! Don't join the dark side!

Give a feck, if my accountant says I'll be better off by £1500 PA then I will sign up!

But due to my circumstances I wont be claiming hardly any expenses, now even though this is good news for HRMC will it look bad for IR35 from a 'proper business' point of view?

[MrsGoof]

You are all missing the point of registering for VAT.

By registering you are actually signing up as an employee of Gordon Brown and declaring that you will act as his agent in the collection of tax from your customers.

Don't sign up! Don't join the dark side!

[EternalOptimist]

As I said I am new to this Ltd malarkey and I don't really understand all the figures just yet, I told my accountant that this new contract will take me beyond 24 months so I won't be claiming any travel and will have no need for accommodation, so I'm guessing I will be better off under the FRS.

You are. And welcome to the Contracting club

[gingerjedi]

No he isnt correct, Denny has hit the nail on the head though.

I would be better off ouside the FRS, maybe you wouldnt.

As for you Ruprect, would it be possible for you to make your point to me without the insults. Pretty please

As I said I am new to this Ltd malarkey and I don't really understand all the figures just yet, I told my accountant that this new contract will take me beyond 24 months so I won't be claiming any travel and will have no need for accommodation, so I'm guessing I will be better off under the FRS.

[malvolio]

You're all wrong anyway, so there...

Only kidding, But two points you are all missing though:

VAT is not yours, it never was, it does not exist in your P&L, you are merely holding it for the Revenue until the quarter-end - in return for which you get to keep any interest it earns in the meantime. It has no effect on your billing, clients will not be put off by the "extra" 17.5% on the bill since they will pass it on to their customers as well. Rates are always quoted VAT-exclusive.

FRS is worth doing unless you have a lot of capital spend of stuff under £2k - unlikley for most people: you get a net 4.5% back for doing nothing. However, that is not all saving, the balance goes against gross profits, so you pay 19/20/21/22% (delete as applicable) against it.

[EternalOptimist]

100% correct Ruprect. I was just trying to put it more diplomatically to EO. You know, without mentioning the bollocks bit. But now, knowing EO, we’ll be treated to a tangential thread on “Ever eaten a pair of bollocks? I haven’t, but a friend of mine did. Discuss” etc etc etc

No he isnt correct, Denny has hit the nail on the head though.

I would be better off ouside the FRS, maybe you wouldnt.

As for you Ruprect, would it be possible for you to make your point to me without the insults. Pretty please

[Bluebird]

But only if you frequently purchase items above the £2K limit each time (the £2K does not work in aggregate). How many of us are actually in that position? Surely not many. In which case FRS has its advantages. I agree, the contractor must make sure he's appying the FRS % against the revenue figure inclusive of standard rate VAT. But we're all intelligent people on this board, aren't we?

The FRS scheme is good for me as it's no paperwork and you get a decent windfall from HRMC [ never look a gift horse...].

You can still offset expenses against CT.

In the above example [ where the contractor pockets £2,225 ] would the expenses have to exceed [ 2,225 /17.5 * 100 ] £12,700 in order to gain any more ??

[Swamp Thing]

This is patently bollocks. You lose the right to claim back VAT on incurred expenses. This is nothing to do with claiming expenses from your company. Understand the difference.

100% correct Ruprect. I was just trying to put it more diplomatically to EO. You know, without mentioning the bollocks bit. But now, knowing EO, we’ll be treated to a tangential thread on “Ever eaten a pair of bollocks? I haven’t, but a friend of mine did. Discuss” etc etc etc

[Denny]

This is patently bollocks. You lose the right to claim back VAT on incurred expenses. This is nothing to do with claiming expenses from your company. Understand the difference.

You can't claim back the VAT on business purchases under £2K, or thereabouts if you are on the FRS. So, if you bought a laptop costing £1500 + VAT and the total came to less than 2K then you can't claim back the VAT at all. If the purchase including VAT comes to more than 2K then you can (if 2K is the limit now).

However, you can reclaim from your business like for like tax deductable dispensations on things like travel, hotels and training costs etc although not the VAT part you may have charged your client for on top of the expense, which must remain in the business and paid to C&E according to your FR calculation. The rest then forms part of the overall profit of the company which will incur CT along with the rest.

[SallyAnne]

Theres a bit of duff info on here like! The flat rate scheme doesn't stop you claiming expenses!!!! It just means you dont claim back the vat from those expenses.

I'm on the flat rate scheme, and I have LOADS of expenses. Flat rate saves me money AND saves me loads of hassle working out the vat on each receipt!

Totally worth it.

[Ruprect]

Dont get involved in the flat rate scheme ginger. The 13 % applies to the bill + the vat

NOT just the bill

so the flat rate vat on £1000 is £152.75 , not £130

although you make a profit of £20 ,you lose the chance to claim expenses

This is patently bollocks. You lose the right to claim back VAT on incurred expenses. This is nothing to do with claiming expenses from your company. Understand the difference.

[Swamp Thing]

Agreed

but its very easy to rack up more than £2k if you go for expenses

hotels, books, training, hardware and software etc

Also, many people make the mistake of paying 13% excluding the vat element

But only if you frequently purchase items above the £2K limit each time (the £2K does not work in aggregate). How many of us are actually in that position? Surely not many. In which case FRS has its advantages. I agree, the contractor must make sure he's appying the FRS % against the revenue figure inclusive of standard rate VAT. But we're all intelligent people on this board, aren't we?