Flat rate VAT

Flat rate VAT

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One of my clients wants to change to the flat rate VAT scheme. In laymans terms what does that mean please ? Will she be better off etc. etc. ?

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By Tonykelly
21st Sep 2011 15:35

special scheme for small businesses

get her to speak to her accountant and he/she will advise her.

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By Tonykelly
21st Sep 2011 15:43

ignore my previous comment

I didn't realise that you yourself were an accountant. I see you have previously enquired about the flat rate scheme.

In a nutshell it is a great time-saver for the small business, and one of the best schemes introduced with a view to cutting admin for the smaller business.

So to answer your question, your client should be better off in terms of admin re VAT.

Financially you need to look at the business sector they fall into. Broadly speaking, people in the service industry tend to be better off financially by going on the flat rate mash-up.

 

 

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By Euan MacLennan
21st Sep 2011 16:30

There is guidance

... on the HMRC website.

I am not convinced that it is a great time-saver, because although the book-keeping is supposed to be simpler under FRS, it sometimes isn't in practice.  There really would be no point in changing to FRS if she did not pay less VAT.

Presumably, you know that she continues to charge 20% VAT on her standard-rated sales, but only has to pay over the FRS % - for example, 13% for secretarial services (reduced to 12% for the first year of her VAT registration) - on her gross sales including the 20% VAT and cannot recover any VAT charged to her on her expenditure (apart from on capital items costing more than £2,000).

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By SE
22nd Sep 2011 11:43

VAT Flat Rate

There are some traps with FRS in particular if your client is a sole trader as has rental income or some of her taxable supplies are zero rated.

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