VAT Flat rate scheme

[skyhuck]

My turnover went above it last year, but as it turned out so has the threshold which is now about 225K (VAT inclusive turnover).

 

 

Nice one !!!

[Quickthorn]

If you register for VAT for the first time and choose the flat rate, they give you a 1% discount for your first year on the scheme. However, there are a couple of areas where you can come unstuck on flat rate VAT:

 

If you buy a lot of materials for jobs which you then charge directly to the customer -eg. planting stock etc., you'll effectively pay VAT twice on these, which will eat into your markup;

 

If you do a lot of zero-rated work - eg. NPTC assessments - you'll pay VAT on that, whereas you wouldn't under flat rate;

 

If your income varies so that you sometimes get refunds under standard VAT, you won't normally get refunds on flat rate, which can be a problem for cash-flow - if you've spent more than you've earned one month, you still have to find VAT on flat rate, whereas you would get a refund under standard VAT.

 

Having said that, what Skyhuck says is very true: it's a lot simpler, and there's less chance of making mistakes. I was saving several hundred a year on the scheme (less now I do NPTC assessments), although that saving is still profit, and gets taxed as such.

[Johny Walker]

so you would pay the flat rate on all your earnings then,weather it was vat exempt or not ??.but can you still claim vat back on purcheses ,tools & plant etc /

[skyhuck]

If you do a lot of zero-rated work - eg. NPTC assessments - you'll pay VAT on that, whereas you wouldn't under flat rate;

 

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Is it not the other way round???

 

On the FR scheme you pay a % of turnover, even income where no vat was charged.

 

Where as with standard vat, you only pay vat collected, less vat claimed back.

Edited January 9, 2010 by skyhuck

[skyhuck]

so you would pay the flat rate on all your earnings then,weather it was vat exempt or not ??.but can you still claim vat back on purchases ,tools & plant etc /

 

You can only claim back vat on capital purchases over £2k.

[Johny Walker]

so is that 2k per item or invoice value ,ie, 3,saws may come to 2k could i claim tha vat back ?

[skyhuck]

so is that 2k per item or invoice value ,ie, 3,saws may come to 2k could i claim tha vat back ?

 

Thats one to ask the accountant, but I would thought per item.

[Johny Walker]

does the fr vary or is it 9% for everyone whos on the scheme

[skyhuck]

does the fr vary or is it 9% for everyone whos on the scheme

 

There are different % rates for different trades.

[Johny Walker]

i take its 9% for us tree folk ,but do you only charge @ 9% & then only pay the vat man 9%