[Closed] Flat Rate VAT

You're currently on 9.5%? Wow, what industry is that?

Anyway, I was on 14.5%, I've deregistered from the scheme and will do 'full' VAT from now on. It shouldn't need that much extra recording, cos you already record all you incomings and outgoings, and keep receipts and invoices, right?

I do not keep receipts and don't really have an awful lot i can claim VAT against. What kind of stuff are you claiming for ?

Well, guess you better start, and if there's not a lot to claim against how come you only pay 9.5%?

Anyway, stuff that's VATable that I'll start reclaiming:

- Accountants Fees
- Phone Bill
- MS Office Subscription
- PI/PL Insurance
- Misc. purchases

thanks for the reminder. need to make a decision by 31st. im not sure yet, i dont have many business expenses to claim vat back on, so need to work out whether its worth the effort changing to standard... but plodding on at 16.5% is basically saying sayonara to 2 grand a year!?

I am pretty much down by approx £5000, cheers Mr HMRC

How are you on 9.5%? It would imply you have loads of vatable costs. As a contractor I have Very little so think I'm on about 15%.

TBH if you're losing out, you were probably paying substantially less net vat than you ought if there's no incentive to come off the flat rate scheme

[I]I am pretty much down by approx £5000, cheers Mr HMRC [/I]

I think what you mean is "thank you Mr HMRC for the £5k a year I've been getting for no reason". The flat rate scheme is to make admin easier, it's not an allowance.

And what Stoner said.

I am pretty much down by approx £5000, cheers Mr HMRC

The letter I received included the following. Hope that it helps explain things to you..

The Flat Rate scheme is a simplification scheme not a tax allowance. More and more often it’s being used for a cash benefit rather than for simplification.

Previously I have been normal VAT personally and it's a pain in the butt if you are disorganised and are crap at keeping your expenses all logged anyway so it shouldnt be any different.

If you see flat rate as being a way to make more money then you shouldnt really be doing it anyway as it is essentially funded by the little things you buy under £2k that you can't claim for.

I am on flat rate (first year having just switched from sole trader normal VAT) and I am very crap at keeping track of my expenses and doing vat returns. I undertake R&D work for myself and other companies as well as consultancy. My consultancy work funds my own R&D and spending can be a bit sporadic through the year so I need to look into whether flat rate after tha change really is best for me. I need to see if I can change my VAT period from the usual quarterly to 1 yearly as I can easily go 3 months without buying any qualifying goods and can then clear 2% on turnover several times over in a busy couple of months of R&D or hands on consultancy (ie consumables and materials for a client project)

very little expenses that could reclaim VAT from, was 14.5%, sure if I plug this years figures through I'm "up" only handful of pounds now, but it's still less of an admin overhead so probably keep on it for a bit.

14.5% going to 16.5%.

Noticed looking at the HMRC test page it states "You may need to do this calculation for every VAT period" which suggests you could switch between the two rates depending on qualifying goods expenses for the quarter.

https://www.tax.service.gov.uk/check-your-vat-flat-rate/vat-return-period

Not that in an IT consultancy / freelance business it's easy to find any qualifying goods expenses. Almost everything is ruled out unless I was selling hardware, but then I wouldn't be a consultancy business any more.

Whole point of the flat rate was to simplify the return and you get a lower VAT rate to accommodate the typical VAT expenses. I still have expenses I pay VAT on and they are business expenses, not personal, but they're all capital expenses, stationary, phone bills, travel, subsistence, etc. All valid business expenses, but all excluded.

Still, I'm sticking with the flat rate as the extra hassle coming off is extra time/cost to me and I still make a saving, even if it's a tiny amount by comparison. To be fair, it's exactly what the gov intended with this rule and my company shouldn't really be profiting off the flat rate (though I do argue small businesses need incentives).

Deadkenny - you can't change scheme mid-year

We were on flat rate for our consultancy business (only 2 of us). Did some calcs after the changes, decided to come off it. There's not much in it but the complexity is pretty low as we already manage all our receipts anyway for expenses so it's just tagging the ones we are VAT except for.

IHN - Member 
Deadkenny - you can't change scheme mid-year

You can't come off flat rate entirely mid year and go back on, no. This is staying on flat rate, but applying the limited cost company test per quarter. The above link does say "You may need to do this calculation for every VAT period". If you can't change it then it would be an irrelevant thing to state.

Anyway, I've asked my accountant for clarification.

You stay on the flat rate but your rate fluctuates based on if your expenses qualify.

If you don't spend 2% on qualifying expenses during that period (eg quarter) then you pay the 16.5%. If you do then you go back to the lower rate you signed up to.

If you leave the flat rate scheme then I think you cannot rejoin for a year.

When my first year 1% discount is up then I'll probably move off the FRS. Waiting for my accountant to send out his recommendation.

I am just on the cusp of taking delivery of a new car. It is in the wifes name but i will be using it. If i setup the payments to come out of my business account, will i be able to claim the vat back on the payments ?

Going to de-register entirely I think, as our revenue has fallen below the limit anyway.

"[i]If i setup the payments to come out of my business account, will i be able to claim the vat back on the payments ?[/i]"

Will you be paying the appropriate BIK for this company car ?

You can't put non-company expenses through the company. Your accountant should have walked you through this.

and if it's a company car there are taxes involved based on the value & emissions rating.

However you can claim travel costs for the first two years contracting with a particular client, but not after than and also have to stop claiming the instant you know the contract will go over the two years.

Accountant is best to answer this stuff though.

[I]I am just on the cusp of taking delivery of a new car. It is in the wifes name but i will be using it. If i setup the payments to come out of my business account, will i be able to claim the vat back on the payments ? [/I]

If it's owned by the business, and for business use, maybe, and if you use it for any non-business use you will probably have a BIK liability on your personal tax return.

TBH, I'm not sure if you're just trolling