Flat Rate VAT turnover note - comment please

Flat Rate VAT turnover note - comment please

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The company changed to the flat rate VAT scheme on dd mmmm yyyy. Before that date turnover was calculated as the total invoice value, excluding value added tax, of sales made.

After that date the company no longer pays over the output VAT, nor can it recover the input VAT. Sales and expenses are therefore shown gross of standard VAT and the flat rate VAT charge shown as a deduction from sales.

Chris Smail

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By theaardvark
14th Jun 2005 17:10

That is correct.
That is how HMRC expect Flat Rate Traders to account for VAT. Income and expenditure shown gross (unless VAT recovered on expenditure over £2,000) and the flat rate charge shown as an expense / deduction from income.

Regards

Paul Taylor
VATease - VAT Advice

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By martinfoley07
14th Jun 2005 18:34

.. but whatever suits...
Your suggested method is the most commonly used, although many show the VAT suffered as an expense rather than deduction from sales (only difference is then margin analysis).

Don't forget on VAT reporting forms you show GROSS sales (i.e. including VAT, not sales excluding VAT, despite what the form says).

Some people (ie those who enter FRS to save money rather than to simplify admin) prefer to account for it so that they keep track of how the FRS compares to standard scheme, and thus the "profit or loss" arising through use of the scheme. One way of doing that is to keep VAT accounts per normal, and the difference arising from application of FRS(hopefully a profit) is simply taken to a residual account.

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