Recently VAT registered - how does this affect self-assesment?

Recently VAT registered - how does this affect ...

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Hello!

I have been operating for the last 6 years as a self-employed freelance marketing consultant, completing online self-assessment returns without issue.

As of the 1st September this year (2013) I have registered on the flat rate VAT scheme, which is allocated the 14% flat rate percentage, minus 1% for first year.

Obviously this won't affect the self assessment return I am currently completing for tax year ending 5th April 2013 - due by 31st Jan 2014.

Although for next years return VAT will be applicable....I don't understand which figures to use.

For example do I simply supply my pre-VAT income/turnover minus usual expenses? The HMRC website details 2 different approaches (one listing VAT paid as an expense) - does this essentially mean the difference in VAT I charge and pay on the flat rate scheme is subject to income tax via SA...?

Eg if my turnover is £60k, I charge £12k VAT, Total £72k

I am collecting £12k VAT and paying back at 13% total turnover £7,800 = so I "keep" £4,200, is this taxble.

Plus as I have registered for VAT during an accounting period, does this affect anything?

I am having some problems "de-coding" parts of the HMRC website and would appreciate assistance in more plain language...!

Please help!

Thanks

Replies (2)

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By Tonykelly
08th Sep 2013 00:11

fairly straightforward so no need to worry

The only change will be to your sales figures.

The expenses can be shown gross for the whole year.

The sales can be shown gross less VAT payments made. In your example, your gross sales are £72,000. VAT payments should be £9,360 not £7,800. The VAT is calculated on the £72k, not the £60k. So your sales for tax purposes would be £62,640. The VAT saving is taxable as your taxable income is £62,640 and not £60,000.

Don't forget there may be some VAT you can claim on pre-registration expenditure, eg equipment you purchased before VAT registration but still using when you became VAT registered.

 

Thanks (2)
By johngroganjga
08th Sep 2013 08:46

The key is that you exclude from your profit theVAT element of the sales income you receive and the recoverable VAT included in the expenses you incur. You exclude them because they are not yours. The difference between the two is simply an amount you are collecting on behalf of HMRC and paying over to them.

The simplest way to achieve this is to record all our income and expenses gross and, as the HMRC website suggests, show the VAT paid and payable to HMRC as an additional expense. I say "and payable" because you obviously have to include not only the payments you actually make during the year but also the liability you have accumulated at the end of the year that you do not pay over until the following year.

Thanks (1)