flat rate scheme

flat rate scheme

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Help....  I have been asked to prepare vat under the flat rate scheme and have read all sorts of conflicting info.  1) do I calculate the flat rate % on the net or gross sale figure? 2) Do I record the purchases as net or gross for accounts purposes? 3) what do I do with the difference, record it as 'other income' which is chargeable to corporation/personal tax?

Thanks in advance for you help and advice

Replies (51)

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RLI
By lionofludesch
25th May 2015 20:15

C

1. Gross - read the instructions

2. Gross

3. Other income. Or expense

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By petersaxton
25th May 2015 20:17

3 Turnover

Using lion's answer for 2 - there is no "difference".

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Replying to johngroganjga:
RLI
By lionofludesch
26th May 2015 11:27

Difference

petersaxton wrote:

Using lion's answer for 2 - there is no "difference".

The difference will be Real Output Tax  - Flat Rate Tax Paid = (usually) a credit.

It's unlikely that this will be zero.

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Replying to pauld:
By petersaxton
26th May 2015 13:07

Calculation

lionofludesch wrote:

petersaxton wrote:

Using lion's answer for 2 - there is no "difference".

The difference will be Real Output Tax  - Flat Rate Tax Paid = (usually) a credit.

It's unlikely that this will be zero.

When I am accounting for FRS I will use the gross turnover (inc VAT) and deduct VAT payable. I will account for expenses using gross expenditure.

I don't have any P&L but, as Paul mentions, it is usually easy to see if there's an advantage to use FRS rather than accruals method.

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Replying to rob winder:
RLI
By lionofludesch
26th May 2015 13:26

Inflating turnover

petersaxton wrote:

When I am accounting for FRS I will use the gross turnover (inc VAT) and deduct VAT payable. I will account for expenses using gross expenditure.

I don't have any P&L but, as Paul mentions, it is usually easy to see if there's an advantage to use FRS rather than accruals method.

Personally, I Iike to keep the turnover right.

But it's just my opinion.

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By User deleted
25th May 2015 22:59

There is a difference - of opinion

1. Gross

2. It's up to you

3. Other income or other expense

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By User deleted
26th May 2015 07:43

Basil

Where is the statutory requirement for companies to record expenses gross?

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By petersaxton
26th May 2015 07:53

Statutory requirement

I don't know of any statutory requirement to record expenses gross.

I do know that there isn't any sensible reason for recording expenses net. If it is to try to compare expenses with businesses who are VAT registered but not on the FRS it doesn't help to compare with unregistered businesses and it is more hassle than recording gross.

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By User deleted
26th May 2015 08:27

Same old same old

A VAT-registered business will never be comparable with an unregistered business, so that argument is a dead herring.

It seems to me that comparing two similar VAT-registered businesses, by adopting the same accounting treatment, is a perfectly sensible approach.

It also seems to me that recording the FRS profit or gain (which, despite arguments to the contrary, is not always obvious) is sensible.

As for hassle, yes I will concede that that might be an issue - particularly if using manual accounting. But none of my clients that use Sage or other software seem to complain that the accounting is unnecessarily onerous.

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Teignmouth
By Paul Scholes
26th May 2015 12:26

Can depend on the software

As if to illustrate the above debate over expenses & profit/loss on using FRS, some software will create a profit or loss on FRS account showing either the Profit on 20% - FRS or profit/loss on FRS compared to what it would have been under standard VAT, and others just take the FRS VAT out the Gross turnover in the P&L and you pay that to HMRC.

It's really up to you, nobody is going to shoot you for picking one route over the other, especially with a business with <£230K turnover.

My preferred route (plus a deliberate plug for Clear Books) is the easy option of just taking the FRS VAT out of turnover, but with a report that, providing you can be bothered to record what the input VAT would have been, gives you a comparison between FRS & Standard (or even Standard & FRS) so that you can make sure you are using the best scheme.

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By User deleted
26th May 2015 14:29

Interesting interpretation

The SI referred to, Basil, makes absolutely no reference to whether items should or should not be inclusive of VAT. It is therefore an irrelevance.

The references to IPT and Fuel Duty are also nothing more than a distraction, because businesses do not pay those items over to HMRC.

As you say, the over-riding requirement is to present a true and fair view. In my opinion, the treatment adopted by virtually all our clients (net income, net expenses and FRS profit/loss) does exactly that - without any over-ride disclosure required.

The notes to the FRSSE in my opinion are there to deal with situations where VAT is irrecoverable by virtue of being blocked (cars, entertaining etc) and simply says that such VAT should be attributed to the relevant expense where appropriate. Although one does not claim input VAT under FRS, that does not make the VAT irrecoverable for the purposes of the FRSSE. Further, if a company chooses to record entries on, say, Sage net how "practicable and material" will it be to then try and attribute input VAT?

Whether a company adopts normal VAT accounting, or FRS (or is indeed unregistered) they all do the same thing - they receive income gross and they pay expenses gross. The VAT-registered companies will only later make a payment of a sum to HMRC. That sum will be the result of a calculation - in one case based on the amount of output VAT charged and input VAT incurred, the other based on gross turnover. But at the end of the day that is all it is - a sum payable to HMRC based on one or other calculation. So, applying the reasoning of those that advocate gross treatment, a company using normal VAT accounting should also prepare its accounts on a gross basis, showing the payments to HMRC as a single entry. That way, you would have a true comparison between like for like businesses - including unregistered businesses, the only variable being the amount of VAT payments to HMRC.

I'm not going to be drawn into yet another interminable discussion on the topic, because either treatment is equally acceptable - those are my last words on the subject.

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RLI
By lionofludesch
26th May 2015 14:59

The point of FRS

One of the declared intentions of the FRS is to reduce bookkeeping.  It therefore makes no sense to insist that companies keep records of input tax content, in order to show expenses net, purely for cosmetic purposes.

Furthermore, what is the cost ?  Is the cost of an expense the net amount before VAT shown on the invoice ?  Or is it the gross amount less the VAT actually recover through the difference between the actual output tax and the FRS tax paid ?

It's not particularly clear cut.

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Replying to memyself-eye:
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By Roland195
26th May 2015 15:22

The irony

lionofludesch wrote:

One of the declared intentions of the FRS is to reduce bookkeeping. 

Always amused by the irony in the length & intensity of debates between us accountants & tax advisors over this bookkeeping simplification.  

 

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By petersaxton
26th May 2015 15:05

The people who are still contributing agree

"The notes to the FRSSE in my opinion are there to deal with situations where VAT is irrecoverable by virtue of being blocked (cars, entertaining etc) and simply says that such VAT should be attributed to the relevant expense where appropriate. Although one does not claim input VAT under FRS, that does not make the VAT irrecoverable for the purposes of the FRSSE. Further, if a company chooses to record entries on, say, Sage net how "practicable and material" will it be to then try and attribute input VAT?"

Quite obviously the VAT on inputs is not recoverable under FRS (ignoring capital items over £2k). Therefore, it is clearly nonsense to say "that does not make the VAT irrecoverable". The VAT IS irrecoverable. The VAT payable is a percentage of gross turnover and is nothing to do with expenses.

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By User deleted
26th May 2015 16:59

OK. I'll bite

What is the 'true' cost?

A company (or other taxpayer) has to account to HMRC for an amount of VAT. That VAT amount is generally derived from one of two calculations - either a percentage of gross turnover or the amount of VAT charged by the business, but after taking credit for any input VAT that it has suffered. It is nothing more than a mathematical exercise to arrive at a single figure payable to HMRC. In your example above, Basil, the true cost of the accountancy fee is £1,200, because that is what was paid. The fact that the business can use the £200 to reduce the amount that it pays over to HMRC doesn't change the amount of that obligation to the accountant. I accept of course that the effective cost to the business is £1,000.

The FRS percentages are of course designed, in theory, to put the business in the same net-of-VAT position that it would have been under normal VAT accounting. Bearing that presumption in mind, it is absurd to suggest that the true costs of one business are higher than those of another in identical circumstances but using different VAT accounting methods to arrive at exactly the same financial position. Put it another way, the 'true' cost of your accountancy fee is the £1,200 less the saving in not having to pay across the full 20% of output VAT. All things being equal (which of course they are not) that saving would be £200.

One final comment on the FRSSE note - if it is as simple as you contend, why do you think there is a need to specifically refer to fixed assets? Under your contention, a simple reference to irrecoverable VAT would have been sufficient. One has to think therefore that the draftsman had something else in mind.

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By petersaxton
26th May 2015 17:00

Famous last words

"I'm not going to be drawn into yet another interminable discussion on the topic, because either treatment is equally acceptable - those are my last words on the subject."

Or not.

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By Briar
26th May 2015 17:29

I'm not a legendary member!

But I agree with BKD and, after discussion with my clients, they agree with a one-line figure of how much they are making (or losing) by using FRS. If they are losing then we try to get them out of FRS. If they are winning, they enjoy knowing that they are making a profit (and how much it is) at the expense of the VATman (and thank me for advising them to use FRS!)

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By petersaxton
26th May 2015 17:38

Calculation

You don't need to go through the hassle of splitting VAT for every transaction to know whether FRS is good. You can judge it by the type and amount of transactions. Which expenditure is VATable? 16.67% is the VAT you would claim using the accruals method. You know the output VAT. You know what VAT you have paid. That's all you need to do. You can do similar  calculations before you apply to use the FRS as well.

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By andy.partridge
26th May 2015 18:38

Fundamental misunderstanding

FRS is a simplified system for small businesses. Businesses for whom it would be a hassle to gen up on what was standard rated, zero rated etc. The concept of the small business owner breaking down each item of cost into net and VAT components is as amusing as it is futile.

I say that because I had one such client who did just that. Of course they gleefully showed the VAT that they would have otherwise recovered on rent, train fares, insurances, postage etc. It took quite a while to add it all back to where it should have been.

 

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By User deleted
26th May 2015 19:06

Agreed, Andy but ...

... virtually of my clients who are on FRS moved onto it from standard accounting and using proprietary software. It was just as easy for them to continue the bookkeeping as before. I find it just as amusing that people seem to think that this is significantly more troublesome than recording the items gross.

It took quite a while to add it all back to where it should have been. I'm sure it did - so why bother, when there was no need to?

What irritates me is that so many people seem to think that their way is the only way - if it suits a business to record income and expenditure net, why the big fuss? Do things your way, let others do what suits them.

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Replying to stepurhan:
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By andy.partridge
26th May 2015 21:59

Why bother?

BKD wrote:

... virtually of my clients who are on FRS moved onto it from standard accounting and using proprietary software. It was just as easy for them to continue the bookkeeping as before. I find it just as amusing that people seem to think that this is significantly more troublesome than recording the items gross.

It took quite a while to add it all back to where it should have been. I'm sure it did - so why bother, when there was no need to?

What irritates me is that so many people seem to think that their way is the only way - if it suits a business to record income and expenditure net, why the big fuss? Do things your way, let others do what suits them.


Because in my example there was no VAT in many of the cost items to separate, but once it was understood that he had assumed (I think it was a mixture of ignorance and laziness) there was input VAT on every transaction, they all had to be reviewed. By the time I had been given the accounts to prepare he was 6 months into the following year merrily doing the same thing.
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By petersaxton
26th May 2015 19:38

Do what suits you?

Like saying: "those are my last words on the subject."

and then carrying on with more words at least twice?

That's just silly.

I don't think many have said that it HAS to be done a certain way - unless they produced legislative evidence. It's just easier. I don't believe anybody who says it's just as easy to split out VAT than not split out VAT. But then he did say: "those are my last words on the subject"!

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By User deleted
26th May 2015 23:01

Still wide of the mark, Basil

The statutory authority that you cite is quite irrelevant. It does nothing but tell one what needs to be included in small company accounts and makes no reference to treatment of FRS businesses. You are drawing an inference that doesn't exist. If you disagree please point to the specific regulation in the SI which dictates the accounting treatment of FRS businesses. As far as our firm's policy is concerned our regulatory body is quite happy with it. If they're happy, I'm happy.

And a further thought. What exactly is 'irrecoverable VAT' as referred to in the FRSEE and by commentators in this thread? There is no concept of irrecoverable input VAT in the context of the FRS legislation. In fact, HMRC have this to say on the matter:

"The scheme does not negate a business' ‘right to deduct’ input tax, as the flat rate percentages have an allowance for input tax built into them. The flat rate scheme simply removes the need to calculate output tax and input tax separately" I reiterate then - the 'true' cost of a particular expense can be established by taking into account the fact that the business's output VAT is payable at a lower percentage than would otherwise be the case. Once you understand how VAT actually works, perhaps the penny will drop regarding the accounting treatment.

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By User deleted
27th May 2015 10:57

Yep, exactly as I said ...

The SI, and specifically the provisions to which you refer, does nothing but stipulate the items that need to be disclosed in the accounts. It goes without saying that those items ought to be correct, but the SI does not even attempt to address the definition of a correct item.

You seem to be arguing that showing the expense as net is incorrect and therefore in breach of the SI. That argument holds water only if it is in fact incorrect to show an item as net - so you're looking at it entirely from the wrong side. If you could convince me that the only correct treatment is to include VAT then I would then agree that treatment otherwise would be (indirectly) contrary to the legislation - but it is not the SI that dicates the VAT treatment of the items in question. You say that showing only 5/6ths of the cost would be incorrect. I disagree with that, and asked you to provide the legislative authority to back up your argument - the SI does not do that.

HMRC's comments are quite relevant - since they reinforce my own comments made earlier that the FRS is just one method of calculating how much VAT has to be paid to them. It does not alter the principle that VAT is prima facie recoverable on relevant costs. One is still getting credit for the input VAT - as a result of the reduced percentage of output VAT. The 'true' cost of the expense therefore remains the VAT-exclusive amount. No true and fair over-ride required. QED.

Despite the comment above, there appears to be a fundamental misunderstanding of how VAT works. It is not the case that one pays output VAT and recovers input VAT - as far as I know, there is no reference in the VAT legislation to recoverable (or irrecoverable) input VAT. One pays output VAT to HMRC, pure and simple. The amount of that sum payable is determined generally by one of two provisions - either by giving credit for input VAT or by applying a particular percentage under FRS (again which percentage effectively gives credit for the input VAT). There is no such thing as recoverable input VAT. Of course, if input VAT exceeds output VAT under normal accounting then that excess can be 'recovered'. But that 'recovery' requires specific legislative provision - if it was a simple case of paying output VAT and recovering input VAT that provision would not be required.

One final comment on the FRSSE provision - 9.15 is not headed "FRS VAT"but "VAT" and deals with a number of particular VAT issues, only one of which refers to FRS. For the reasons stated above, I consider that 'irrecoverable' refers to input VAT for which no credit would be available under either normal or FRS accounting, and not to input VAT that remains 'recoverable' through reduction of the amount of output VAT payable under the FRS.

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By petersaxton
27th May 2015 08:15

From a Yorkshireman

"I'm not going to be drawn into yet another interminable discussion on the topic, because either treatment is equally acceptable - those are my last words on the subject."

FIRST YORKSHIREMAN:

And you try and tell the young people of today that ..... they won't believe you.ALL:They won't!

 

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By Slowplaypo
27th May 2015 12:30

Recording of VAT on purchases

Since the FRS is a scheme to simply and remove some of the administrative burden of doing 'full fat' VAT, and in the majority of instances where I recommend it there is a financial 'gain' to be made (back of fag packet calculation) I wonder what our friends in HMRC would think on inspection? A trawl through the transaction analysis would show you are accounting fully for VAT, and since you have not elected to leave FRS then I would conclude that there has been a financial benefit. I don't suppose they have any powers to say that since you are fully accounting for VAT then you should use the full scheme and not FRS? Well not yet anyway!

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By raybackler
27th May 2015 13:39

@lionofludesch

A correct and simple answer to the OP's question.  Putting some example numbers on it using your headings:

1. Net invoice £1000 plus £200 of VAT = Gross invoice of £1200.  Example using 14% Flat Rate = £168 due to HMRC.

2. Expenses £100 plus VAT £20 = £120.

3. VAT Gain £200 less £168 = £32 Other income.

Covering what others have said, if you want to show Expenses net, then you can take the £20 of VAT and show it as Other Expense = Irrecoverable VAT.  If the Irrecoverable VAT on Expenses is greater than the Flat Rate gain, it then raises the question of why the client is in the Flat Rate Scheme.  This number is always worth knowing in case your client ought to be advised to reconsider.

 

EDIT:

I should have said that, whilst I was agreeing with the answer given by @lionofludesh as acceptable for the OP, in my case under Option 3 I show it as Sales and, therefore, agree with Tom 7000.  There is no taxable profit difference in either approach.

 

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7om
By Tom 7000
27th May 2015 13:09

my thoughts

 

1) Gross

2) Gross

3) Sales

 

If you do 1. on NET you get lots of fines and can go to jail

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By PKan
27th May 2015 14:00

at least some

Can provide a straight forward answer to a straight forward question rather than tying themselves and others  up in knots.

 

simples!!!

 

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By Roland195
27th May 2015 14:18

Quality

I have got to say that the quality of the technical debates on here has improved greatly over the last wee while with the exchanges between the heavyweights BKD & Basil proving highly educational.

It's just a shame that their undisputed, vast technical expertise needs to be brought to bear on such a weighty issue as this.  

 

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By petersaxton
27th May 2015 14:21

Simple?

People can get things wrong very simply.

Sometimes there is more to an issue than others even understand.

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By andy.partridge
27th May 2015 15:08

A fine debate

Not only have matters been beautifully argued (mostly) but they have been expressed in a way that would surely put off anyone who is not a finance professional from becoming a member. Win-win!

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By cfield
28th May 2015 00:47

What about comparability?

Despite what HMRC thinks, nobody uses the flat rate scheme to save admin. They use it to save VAT. It is basically an additional revenue stream; an incidental way of making an extra profit, like commission or banner advertising. As such, the best place to include it in the accounts is within Other Income.

The trouble with stating expenses gross under FRS is that it makes the figures incomparable with previous years when the client was using the standard method, or with other businesses still on the standard method. If you show accountancy fees of £1,000 in Year 1 and £1,200 in Year 2 when in fact they were the same, that is misleading to anyone reading the accounts (especially if they're a new client and you're preparing a quote for them!).

For example, a bank manager might ask "Why did your expenses go up so much last year?" He would be slightly bemused to hear the answer "It's because we're on the flat rate scheme now". You're supposed to be able to compare one year with the next when you're reading accounts.

It might even trigger an HMRC enquiry if expenses suddenly went up for no apparent reason. It is a well known fact that HMRC work on benchmarks, and any unexplained discrepancies could cause a red flag to flutter.

Same goes for turnover. If you show trading income as the gross invoice figure less flat rate VAT, it will be significantly higher than the year before when it was shown net under the standard method, when in fact it might have stayed the same, only gone up slightly or even gone down. This could be highly misleading.

It also means accruals and prepayments would have to be calculated gross, which not only goes against the grain for any decent book-keeper but may lead to errors or inconsistencies.

The technical bods at the Institute might well say it is the correct accounting treatment, but they're concerned solely with the more pedantic/technical aspects and sometimes allow that to get in the way of common sense.

The bottom line should be the same under either method of course, so it doesn't make any difference to tax or net assets. In that sense, it's all a bit of a storm in a teacup.

For the above reasons, I agree with BKD.

 

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Replying to lionofludesch:
RLI
By lionofludesch
29th May 2015 09:01

Interesting view

cfield wrote:

Despite what HMRC thinks, nobody uses the flat rate scheme to save admin. They use it to save VAT. It is basically an additional revenue stream; an incidental way of making an extra profit, like commission or banner advertising. As such, the best place to include it in the accounts is within Other Income.

The trouble with stating expenses gross under FRS is that it makes the figures incomparable with previous years when the client was using the standard method, or with other businesses still on the standard method. If you show accountancy fees of £1,000 in Year 1 and £1,200 in Year 2 when in fact they were the same, that is misleading to anyone reading the accounts (especially if they're a new client and you're preparing a quote for them!).

For example, a bank manager might ask "Why did your expenses go up so much last year?" He would be slightly bemused to hear the answer "It's because we're on the flat rate scheme now". You're supposed to be able to compare one year with the next when you're reading accounts.

It might even trigger an HMRC enquiry if expenses suddenly went up for no apparent reason. It is a well known fact that HMRC work on benchmarks, and any unexplained discrepancies could cause a red flag to flutter.

Same goes for turnover. If you show trading income as the gross invoice figure less flat rate VAT, it will be significantly higher than the year before when it was shown net under the standard method, when in fact it might have stayed the same, only gone up slightly or even gone down. This could be highly misleading.

It also means accruals and prepayments would have to be calculated gross, which not only goes against the grain for any decent book-keeper but may lead to errors or inconsistencies.

The technical bods at the Institute might well say it is the correct accounting treatment, but they're concerned solely with the more pedantic/technical aspects and sometimes allow that to get in the way of common sense.

The bottom line should be the same under either method of course, so it doesn't make any difference to tax or net assets. In that sense, it's all a bit of a storm in a teacup.

For the above reasons, I agree with BKD.

 

The original question on turnover was about whether to apply the flat rate percentage to gross or net turnover, not what to include in the accounts.  Two very separate issues.

As to expenses, most businesses choose flat rate because they have little input tax but you could always restate your comparatives if you feel that the accounts don't give a true and fair view.

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Replying to Rebecca Cave:
By cfield
29th May 2015 19:22

Down with long quote boxes

lionofludesch wrote:

As to expenses, most businesses choose flat rate because they have little input tax but you could always restate your comparatives if you feel that the accounts don't give a true and fair view.

Thank you for your comments Mr Lion. 3 things........

1) If you're going to quote previous posts, please don't show the whole flaming post again. Just highlight the passage you wish to comment on and delete all the rest. These conversations are long enough as it is without people making them even longer.

2) The first query was the easy bit. That was dealt with ages ago. All the other posts since then have been about the accounting treatment.

3) If one agrees with the comparability argument, then why not do it correctly from the start instead of re-stating figures later? All you've got to do is post the invoices with VAT as before and then journal the difference each quarter to a Gain on Flat Rate scheme account. It's a massive own goal not to let the client know how much he's saved anyway.

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Replying to Paul D Utherone:
RLI
By lionofludesch
30th May 2015 09:40

Obvious in most cases

cfield wrote:

3) If one agrees with the comparability argument, then why not do it correctly from the start instead of re-stating figures later? All you've got to do is post the invoices with VAT as before and then journal the difference each quarter to a Gain on Flat Rate scheme account. It's a massive own goal not to let the client know how much he's saved anyway.

Maybe because the client keeps the books ?  He might not be all that interested in how much he's saved if it turns out it's less than the extra accountancy fees he's racked up finding out how much he's saved.

That there's a saving is obvious in most cases.  Quantifying it isn't necessarily as important to the client as we think.

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RLI
By lionofludesch
28th May 2015 09:29

Other income

I prefer not to net the notional input tax credit off expenses as - in theory at least - it could be more than the total expense !!

I prefer not to add it to turnover because, one day, that might tip the scales of some micro-entity threshold.

 

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By PKan
29th May 2015 14:51

simple !!
sometimes some make heavy work of light duties and still get it wrong !

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By andy.partridge
29th May 2015 22:03

My experience
Clients below the threshold are interested in how much extra being registered for VAT on FRS might make them. Those who are registered above the threshold are interested in the simplicity and not the theoretical gain of being on FRS. I suspect the idea of detailed comparisons is accountant driven, not client driven.

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Replying to Justin Bryant:
By cfield
29th May 2015 22:30

VAT flat rate gains

andy.partridge wrote:
I suspect the idea of detailed comparisons is accountant driven, not client driven.

Only because they don't realise how much money they could make out of it. IT consultants, for example, earn a lot more than the VAT threshold.

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By User deleted
29th May 2015 22:41

Different experiences, then, Andy

Almost without exception my clients are more interested in the saving than the simplification. In virtually every case they've already being using accounting software, have gotten used to it and are therefore quite happy to carry on as before - but suddenly finding themselves with a Brucie Bonus. And I can assure you that the gain is anything but theoretical. (I would say "gain or loss" but I don't know a single client that has made a loss through using FRS - I think that tells its own story.)

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By andy.partridge
29th May 2015 23:34

Sorry, ambiguous and misleading
I meant the perpetual quarterly 'here is what you've gained' concept of splitting input VAT. My fault, I shouldn't post so late.

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By petersaxton
30th May 2015 00:00

"I don't know a single client

"I don't know a single client that has made a loss through using FRS"

People don't go on FRS if it costs them money. You might say that means they don't care about the simplicity but they don't usually understand the difference.

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By User deleted
30th May 2015 10:25

Agreed, lion ...

... the operative word being "most".

And for the few of our clients that do use the FRS as it was intended - ie recording all items as gross in their books, that is the basis on which the accounts are prepared. It would be an unnecessarily expensive exercise to go back and try to strip out the VAT.

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By andy.partridge
30th May 2015 10:08

Yes!


@ lion @bkd

That is what I meant in my 3rd sentence of post 22.03.

 

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Replying to Justin Bryant:
RLI
By lionofludesch
31st May 2015 09:13

Toss up

andy.partridge wrote:

@ lion @bkd

That is what I meant in my 3rd sentence of post 22.03.

I suspect that, if you need to do the arithmetic down to the last penny, it's a bit of a toss-up anyway.  And you'll always be assuming that the future is going to be the same as the past.

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Teignmouth
By Paul Scholes
30th May 2015 20:32

Loss under FRS

I tend to agree that most FRS businesses I've dealt with are better off but it has to be watched.

In the past year I've come across one business on FRS with substantial zero rated sales of goods to the EU, where they should have withdrawn and another buying goods from the EU but treating them as zero rated, thus incorrectly avoiding the Box 2 declaration.

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RLI
By lionofludesch
31st May 2015 09:10

Lease

You're right, Paul.  And you have to explain the rudiments to the client.

I had one making not a fortune but a worthwhile sum on FRS.  Until he sold the van that he owned and decided to lease one.

Tipped the scales entirely the other way.

Surely these are just opinions.  So far as I know, there's been no guidance from the professional bodies who are far too busy dealing with things like derivatives.

Not that it has a great effect on the published P+L, with its very basic format. And HMRC don't care so long as the profit's not affected. We can all cheerfully do it our way.

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By petersaxton
31st May 2015 10:18

Easy enough

I calculate everything gross and do a quick calculation regularly to see whether the numbers are still favourable. It only takes a minute or two to split the expenditure between VAT and non-VAT and is much easier than the client having to split many transactions.

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