Paint Manufacturer Flat Rate Scheme

Paint Manufacturer Flat Rate Scheme

Didn't find your answer?

I have a new client who manufactures water based paints and sells them at craft fares.

They have said that their rate of VAT is 7% based on what they were told by their old accountant.  However they don't know the category and I cannot find it in the list with HMRC.

The only category I can find is the manufacture of industrial chemicals, paints, sealants and inks which is 9.5%.  Would this be correct?

They are also adamant that because their business is also the supply/selling of these paints, they should be a in a category more fitting to this description.

What are your thoughts?

Replies (18)

Please login or register to join the discussion.

Euan's picture
By Euan MacLennan
20th Oct 2014 11:02

Manufacturers have to sell their products

Manufacturers also have to sell their products, so I don't see why the manufacturing category of 9.5% is necessarily incorrect.

The alternative might be:

Retailing that is not listed elsewhere

Paints glass

which is 7.5% (I don't think there is any category at 7%).  My problem with that category is that I don't understand the description "Paints glass".  If it were "Paints, glass" or "Paints and glass", I would consider it a possibility.  If it means "Painted glass", it would not apply.

Thanks (0)
By mrme89
20th Oct 2014 11:05

Could the 7% include a 1% first year discount, meaning they used a category at 8%?

 

I do agree that 9.5% would seem appropriate from what you have described. 

Thanks (0)
avatar
By MrDSGrace
21st Oct 2014 01:13

Thanks everyone for your help - really appreciated!

The other thing (I think it has probably been asked before) is how to account/record the VAT that is not being paid over to HMRC.  I understand that they still charge the full 20% on their invoices, then of course 7.5% is paid to HMRC.  I, myself would have calculated the VAT as standard and put this into the VAT account and then journal the 12.5% out into some other income account.  However, I have taken on a different client who is on the FRS and their old accountant just didn't put it anywhere.  The VAT account is always just the FRS amount??!!

Now I'm confused as to what is best practice/correct.  I don't want to put it to sales as this would make the sales figures incorrect when reporting turnover, so I really am not sure what to do?

Thanks again for your guidance!

Thanks (0)
avatar
By MrDSGrace
22nd Oct 2014 00:15

Hi Basil,

Thanks for your reply, guidance and reference of VAT733, I will definitely give this a read.

Furthermore, I do fully understand that an invoice of £1,000 +VAT = £1,200 and then 7.5% of this is what is paid to HMRC.  Maybe my earlier post was confusing. I have re-read and can see why...oops!

Also, I have realised that for a set of company accounts operating under the standard VAT scheme, the turnover policy is to exclude VAT.  I assume then that the note needs to be changed for a FRS Ltd?

Should the entry in Sage be a £1,000 invoice with a TC of T1.  Sales = £1,000 and VAT account = £200.  The VAT return wizard will only calculate 7.5% of this and then journal the difference out to the sales account??

At present, as per previous guidance from the previous accountant, I have been inputting the sales invoices as the gross amount with a T0 code, therefore the VAT account is always only the FRA.

 

Thanks (0)
By petersaxton
22nd Oct 2014 03:44

Flat rate VAT

I just use gross figures in the accounts with the VAT payment being deducted from sales.

A lot of people look at flat rate VAT accounts and try to compare them to normal accounts but it can't be done. You can always record everything net and make an adjustment but it seems a lot of hassle for no benefit other than comparison. You wouldn't do that for a company that wasn't VAT registered so why do it for a flat rate VAT scheme?

Thanks (0)
By petersaxton
22nd Oct 2014 22:28

Accruals concept!

You deduct the VAT payments relating to that year!

Thanks (0)
By petersaxton
22nd Oct 2014 23:43

Take the logical one

<<<If your phrase "VAT payments relating to that year" means "VAT payments relating to the VAT-inclusive sales made in that year", then your sentence is correct.

If however your phrase means "VAT payments made in that year" [which is the interpretation which I would normally expect], then your sentence is incorrect.>>>

I think your interpretation is wrong. Why should anybody say "VAT payments relating to that year" if it meant "VAT payments made in that year". Surely they would say "VAT payments made in that year".

Thanks (0)
Replying to paul.benny:
By petersaxton
23rd Oct 2014 14:00

normally v correctly

fawltybasil2575 wrote:

I am in danger of getting lost in the " semantics of 'interpretation' " [I was simply trying to explain what interpretation one would "normally" expect].

Very useful side issues can develop from AWEB threads, but I always try [whether successfully or otherwise] to keep the OP's original, and subsequent, questions in mind.  In that context, I tried to explain to the OP, in my post at 4.57 on 21 October 2014, how the Sales figure in the Accounts should be arrived at, ie the VAT-inclusive Sales less the VAT Payable in respect of that Sales  figure - I explained that the "VAT Payable" figure should take account of the opening and closing VAT accruals. 

I was thus a little surprised at your "Accruals concept !" post - thinking that your post might possibly have given the inadvertent impression that you were in disagreement with the need to adjust the VAT accrual figures,  I sought to clarify in my response.  

I am seeking to avoid the OP's possibly misinterpreting your posts [as I readily acknowledge that I may have done].

Can we therefore please both confirm to the OP that, in preparing the Accounts, the VAT figure [to be deducted from the VAT-inclusive Sales figure] should be [i] the VAT Paid plus [ii] the closing VAT accrual, less [iii] the opening VAT accrual ?

Basil.   

That's one way of calculating it

Thanks (0)
avatar
By MrDSGrace
23rd Oct 2014 13:29

Can I just jump in (like a pigeon amongst two cats) and say that now I do not understand the opening/closing VAT accrual.

I do not have that on the previous accounts and it just seems that on all the income the FRA has been charged and paid.  

If the first VAT invoice issued is £1,000 + VAT, then the sales account will show £1,200 and the VAT account will show £90 (7.5%).  What is supposed to be accrued?

Thanks (0)
Replying to youngloch:
By petersaxton
23rd Oct 2014 14:10

Not the best example

MrDSGrace wrote:

Can I just jump in (like a pigeon amongst two cats) and say that now I do not understand the opening/closing VAT accrual.

I do not have that on the previous accounts and it just seems that on all the income the FRA has been charged and paid.  

If the first VAT invoice issued is £1,000 + VAT, then the sales account will show £1,200 and the VAT account will show £90 (7.5%).  What is supposed to be accrued?

If there was a previous period with invoices there would then be a VAT amount which relates to that period but would be accrued at the end of that period.

The VAT would be paid in the next period.

In that period the VAT of £90 would be accrued at the end of that period and reversed at the start of the next period and paid in that period.

Basil only seems comfortable when the VAT relating to the period is accrued at the end of the period and the previous VAT has an accrual reversed and paid in the period. If the question is what is the relevant VAT for the period then the answer is £90 whichever way you do it.

To explain the semantics of "relevant" that Basic has problems with: If somebody asked "What are the relevant sales of the period you would add the sales invoices of the period and not refer to the money received in that period. Just use the same thought process with VAT.

Thanks (0)
avatar
By MrDSGrace
23rd Oct 2014 17:09

I fully understand everything you have now said and it makes complete sense.

Now, will you two put your toys back in the pram?!

Thanks for all the input and help!

Thanks (0)
Replying to Accountant A:
By petersaxton
23rd Oct 2014 17:26

He must be glad we helped him

MrDSGrace wrote:

I fully understand everything you have now said and it makes complete sense.

Now, will you two put your toys back in the pram?!

Thanks for all the input and help!

I dont think you understand that Basil was simply trying to get clarification so you would understand.

I don't think much of how you show your gratitude.

Thanks (0)
RLI
By lionofludesch
23rd Oct 2014 17:14

Old Rate


Could the rate have been 7% before the VAT rate went up to 20% and the trader didn't "notice" the change ?

Just a thought .......

Thanks (0)
avatar
By MrDSGrace
23rd Oct 2014 17:39

I certainly do and for that I am very grateful, to both of you for your input.  As I said in my last post, "thanks for all the input and help".

I don't think much of how argumentative you are.  

Thanks (0)
Replying to puds2015:
By The VAT Doctor
23rd Oct 2014 18:58

Let's be nice

MrDSGrace wrote:

I certainly do and for that I am very grateful, to both of you for your input.  As I said in my last post, "thanks for all the input and help".

I don't think much of how argumentative you are.  

I have commented elsewhere in a similar vein. It's not everyone, just a few.  There is an amazing amount of talent contributing here on AW.  I have become more aware of several different ways of thinking that I was not aware of before - in my area there are definitely lots of grey areas and I am learning all the time, after over 25 years.  I like to help others too as others do, but I do think sometimes the love of winning an argument is greater.

Let's all be nice.

Thanks (0)
avatar
By MrDSGrace
23rd Oct 2014 17:49

It was lighthearted. Are you two that serious that you cannot take a joke?  I'm not here to argue. I cannot express enough how grateful I am.  It's coming to the end of the week - cheer up and take a joke.

If in future you see a post from me, feel free to not comment.  

P.s I never asked you to wake up at 4am and feel compelled to make a response. So don't hold that against me.  

Thanks (0)
By petersaxton
23rd Oct 2014 20:33

What's a joke?

I don't think that there's a problem with discussing things in detail.

Basil pointed out something that showed I could have expressed it more clearly and I showed how it could have been clear enough but obviously Basil wasn't thinking I'd misunderstood but he wanted to be sure the OP had understood. 

The OP said: "I never asked you to wake up at 4am and feel compelled to make a response. So don't hold that against me."

Basil wasn't blaming you he was pointing out the effort he had made to try to help you.

But you'd now said it was a joke so that's all right then!

Thanks (0)
Replying to zirinisp:
By The VAT Doctor
23rd Oct 2014 21:53

thanks

fawltybasil2575 wrote:

It's rather difficult to respond to your post without such response appearing to support your implied view, but I shall try my best.

 

There is a danger, especially with the written word, that when two members with contrary views express those views candidly [and, in so doing, have to analyse the other's points in order to support their contrary view], this can be perceived as being an exercise in what you term "winning an argument". Giving that word "argument" its wider interpretation, of course, that is the whole point of the exercise, ie to seek [upon holding a particular view] to persuade the other member [and the AWEB community at large] of the validity of one's viewpoint.

 

But I feel, probably because you are such a thoroughly nice chap [or lady - I have not checked your profile], that you are inadvertently assuming some degree of unnecessary heat is being imparted in the exchange of views, when in fact none exists ; and thus interpreting it as an "argument" in its more restricted sense [this is a not unknown phenomenon].

 

Personally, and I would ask you to read my posts on other threads in the last 12 months [apart from the one referred to below, as you have been a contributor to it]. I have frequently sought to take the heat out of a debate, rather than add to that heat - even conceivably at times to the point of perceived obsequiousness; and show, or at least seek to show, total respect, even when I believe the other member is very wrong. I take that approach into my private life ; and will address a 14 year boy as "sir" quite naturally [even though sadly I am several times that age].

 

I could very easily take exception to your implied view that in this thread there has been an "argument" in its narrower sense, but will make no comment. You have, in the other thread to which you refer [your words " " are a reference to it] made similar implied comment, in relation to a very complex matter on which I have readily acknowledged that there is a degree of doubt in the taxation world.

 

What started as a frank but polite exchange of views in that other thread, re a difficult subject, was interpreted by you as two members [of which I am one and a highly esteemed "expert" contributor the other] not being "nice" and not being "friendly" for, in my submission, no valid reason. I have a huge respect for that other member, as you will see from several other threads in the last 12 months or so.

 

Frankly, I was more than concerned, and indeed rather upset, at your last post on that other thread ; and if you would read it again, you will see that it could certainly, and indeed justifiably, be perceived as condescending [ and in my submission simply incorrect].

 

So yes indeed, let's be "nice" and friendly", but implicit in a plea [on a thread] for members to be "nice and "friendly" is that they are not so [that's where the upset arises]. I shall leave it to your good nature to re-phrase the post if you wish.

 

No offence meant by my above comments.

 

Basil.

 

 

 

 

 

.

 

 

Thanks Basil.  All understood, and edits abound :-)

Wayne

Thanks (0)