Was the VAT FRS an own goal?

[EternalOptimist]

So am I, hence the question.

I stayed outside the FRS not just because I was clocking up loads of expenses but also because I was cheerfully buying software, hardware and training. Knowing I could get the VAT back was a small incentive to buy stuff.

If I knew that I wasn't going to get any of the VAT back for stuff, I would be less inclined to have the company buy stuff and instead have it in my pocket.

By extrapolating this across all small businesses, are directors drawing money from the company and importing luxury goods or buying overseas holidays or wasting money pouring it into their pension pit? Money that would have been spent on investments, that is, used to buy services and products from other businesses?

got you.

It hasnt changed my behaviour, I used to see the old method as a bit of a fiddle, the FRS is less of a fiddle but easier to administer.

I probably lose 4-500quid a year. But I spend more than that on double bacon and egg butties.

[Moscow Mule]

By extrapolating this across all small businesses, are directors drawing money from the company and importing luxury goods or buying overseas holidays or wasting money pouring it into their pension pit? Money that would have been spent on investments, that is, used to buy services and products from other businesses?

I'm on the FRS. Myco have recently bought over £1000 of servers, licences and other crap.

Extrapolate that across all small businesses and it seems like a nice little earner for HMRC...

[RichardCranium]

slightly puzzled

So am I, hence the question.

I stayed outside the FRS not just because I was clocking up loads of expenses but also because I was cheerfully buying software, hardware and training. Knowing I could get the VAT back was a small incentive to buy stuff.

If I knew that I wasn't going to get any of the VAT back for stuff, I would be less inclined to have the company buy stuff and instead have it in my pocket.

By extrapolating this across all small businesses, are directors drawing money from the company and importing luxury goods or buying overseas holidays or wasting money pouring it into their pension pit? Money that would have been spent on investments, that is, used to buy services and products from other businesses?

[EternalOptimist]

??

do you mean that businesses spend less because they cannot claim expenses ?



slightly puzzled

[RichardCranium]

Has the VAT Flat Rate Scheme resulted in businesses spending less, thereby preventing investment and stopped money circulating, thereby hindering the economy.?

When the 'credit crunch' kicked in, did the VAT FRS suddenly become a bad idea for the economy?