A client is in their first year. Their annual sales will not exceed the £150,000 limit by more than £15,000. Their first year in the scheme ends on 30 September 2014.
Other than the business closing for a holiday (to reduce sales to be within the threshold) is there another scheme or another option? To suffer the full 20% of VAT for the past 9 months would put the business in cashflow difficulties. However, I cannot think of another way to reduce the sales sufficiently. The closures can cause upset for this business as it is in its first trading year and July to September is its busiest time of year.
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Replies (6)
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Check the thresholds
The threshold for leaving the scheme is £230,000 including VAT.
As long as the clients estimate of turnover was under £150,000 excluding VAT when they joined, and this was reasonable at the time, then they should be fine.
Exactly
Its the projection at the time of joining the scheme that is important, rather than the actual turnover.
Did they have a better first year than forecast?
If so, then as long as there is good basis and reasoning for the initial forecast then there shouldn't be a problem to remain on the scheme.
Yes
This is what worries me most, that yes it is the first year of trade and it is much better than first anticipated last September. It will be 3 weeks over the original forecast so I am hopeful we will be able to stay on the scheme.
Have you ever come across clients that have had this please?
Have had a couple and these haven't been queried by HMRC.
What line of business is your client in?
Thank you Andrew, JC and Basil. These are comforting words.
My client is a restaurant and so a high risk client. The restaurant is the only one of its kind in the town it is situated in so sales can be very tough to compute. Basically, the higher sales are the result of two very good summers in the UK and lots more tourists than could reasonably be expected.
I'm hoping the HMRC view the 10% extra as borderline and allow my client to continue with the scheme. In all I have read, 10% increase in sales year on year appears to be their estimate.
I will prepare some computations and see if it gets queried.
Thank you for your help.
Agree with Basil
The fact your client is in the restaurant trade, the sales of which are very tough to predict any year, never mind the first, I would be more than comfortable advising my client to stay on the FRS at this stage.
As Basil states, this should be monitored to ensure the turnover threshold isn't breached and that the scheme is still beneficial.
Agree with JC and Basil
These replies are very helpful and I am truly grateful of your support. I feel more comfortable advising my client now and they in turn will be grateful to hear they can stay open.