interaction, income tax & VAT flat rate scheme

Hello all

New client. Self employed for several years. Year end 31st March. VAT registered. VAT Return dates also end 31st March. All services standard rated at 20%. All fees received promptly. No bad debts or delayed settlement.

He pays all his expenses immediately without delay. He has minimal expenses, his income is well below the £150,000 turnover and he is in the VAT flat rate scheme.

Until now he has prepared his own SA returns but is too busy so wants us to do the job for him. He wants us to continue to use the same simple basis as he has used in the past, that is, his self employment pages are to be prepared on the "receipts and payments" basis, i.e. "money in less money out". [to quote him].

He has always filed the full SEF pages and completed them as follows - Business Income = total gross invoices issued including 20% VAT he has charged, Business Expenses = all listed gross including VAT.

Under "Other business expenses" he has claimed the 4 quarterly VAT flat rate payments he has made to HMRC in the tax year.

He view is that he has received all his fees including VAT in his hands, he has paid out all expenses including VAT and he has paid HMCE those 4 quarterly VAT payments so they are also a business "expense".

His view is that, by following this simple approach, he is paying income tax on the net result of his "money in less money out" philosophy.

Anyone see anything wrong with continuing this straightforward approach?

Thank you for any thoughts and may I wish you all a very prosperous 2013.

Comments
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Do the calcs

ShirleyM |
ShirleyM's picture

Thanks for your thoughts,

taxinfo |

Happy New Year

Marion Hayes |

Hi Marion

taxinfo |