FLAT RATE VAT SCHEME
20 January 2004, 09:11 PM
#1
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Hi,
I've just signed up for this, may be of interest to others who charge VAT but never reclaim more than 12.75% VAT.
I work through a limited Company in the IT sector. The above scheme allows me to reclaim a percentage of VAT charged on outputs without the aggro of analysing all my purchases..
e.g
In one qtr I raise Invoices for £18,000 (ex vat) attracting VAT of £3150 giving a total of £21,150. Under the standard scheme you could reduce your VAT payment by the amount of VAT you are charged on legit Company purchases. In the IT Consultancy sector these dont generally amount to much so often you handover the majority of what your charge.
However under the flat rate VAT scheme the net vat repayble is calculated as follows (using above figures)
Net VAT Payable =
£21,150 * 13/100 = £2749.50 (i.e £400.50 less than the gross vat)
or
Net VAT payable = Value of Invoices (inc VAT) * sector percentage
On the above figures unless you regularily reclaimed £400 of VAT each quarter you are saving money. The percentage used is dependant on the business sector you operate in. In addition VAT on larger purchases (i.e Goods > £2000) can still be recovered.
It may not suite your business but it seems to make sense for any IT contractor. Some lazy b*astard Accountants will shy away from the above as its means changing their procedures so insist on it if it makes sense to you....or DIY VAT return as I do.
Full details including sector percentages and application form can be found on www.hmce.gov.uk. It takes five minutes to sign up.
TJ
[Edited by T.J - 1/20/2004 9:12:48 PM]
I've just signed up for this, may be of interest to others who charge VAT but never reclaim more than 12.75% VAT.
I work through a limited Company in the IT sector. The above scheme allows me to reclaim a percentage of VAT charged on outputs without the aggro of analysing all my purchases..
e.g
In one qtr I raise Invoices for £18,000 (ex vat) attracting VAT of £3150 giving a total of £21,150. Under the standard scheme you could reduce your VAT payment by the amount of VAT you are charged on legit Company purchases. In the IT Consultancy sector these dont generally amount to much so often you handover the majority of what your charge.
However under the flat rate VAT scheme the net vat repayble is calculated as follows (using above figures)
Net VAT Payable =
£21,150 * 13/100 = £2749.50 (i.e £400.50 less than the gross vat)
or
Net VAT payable = Value of Invoices (inc VAT) * sector percentage
On the above figures unless you regularily reclaimed £400 of VAT each quarter you are saving money. The percentage used is dependant on the business sector you operate in. In addition VAT on larger purchases (i.e Goods > £2000) can still be recovered.
It may not suite your business but it seems to make sense for any IT contractor. Some lazy b*astard Accountants will shy away from the above as its means changing their procedures so insist on it if it makes sense to you....or DIY VAT return as I do.
Full details including sector percentages and application form can be found on www.hmce.gov.uk. It takes five minutes to sign up.
TJ
[Edited by T.J - 1/20/2004 9:12:48 PM]
20 January 2004, 10:08 PM
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I wouldn't do it. Maybe I'm too cynical, but I reckon it's a ruse by the revenue. You're basically putting your hands up to say you are not a proper business. Takes me about 2 hours a quarter to do me VAT. What's a grand or so a year to an accountant? **** all.
edited to add an apostrophe
[Edited by workshy_fopp - 1/20/2004 10:09:33 PM]
edited to add an apostrophe
[Edited by workshy_fopp - 1/20/2004 10:09:33 PM]
20 January 2004, 11:47 PM
#5
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workshy,
Your too cynical. I've been running a ltd company for 17 years reclaiming miniscule amounts of vat compared with sales vat with no problems...they like me cos I hand over most of what I collect.
HMCE will know your business area if your a ltd company and they already analyse returns by business sector to spot potential fraud i.e the have tons of trend stats...stray outside normal bands and they will be on to you.
An IT contractor Invoicing £72k ex vat per year would reclaim £1600 vat per year under the scheme instead of possibly £400 'ish outside the scheme.
At the end of the day its your 'saving', not your accountants.
TJ
[Edited by T.J - 1/20/2004 11:48:28 PM]
Your too cynical. I've been running a ltd company for 17 years reclaiming miniscule amounts of vat compared with sales vat with no problems...they like me cos I hand over most of what I collect.
HMCE will know your business area if your a ltd company and they already analyse returns by business sector to spot potential fraud i.e the have tons of trend stats...stray outside normal bands and they will be on to you.
An IT contractor Invoicing £72k ex vat per year would reclaim £1600 vat per year under the scheme instead of possibly £400 'ish outside the scheme.
At the end of the day its your 'saving', not your accountants.
TJ
[Edited by T.J - 1/20/2004 11:48:28 PM]
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