VAT flat rate scheme

VAT flat rate scheme

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Hi

I have a client who has not exceeded the de-reg limit for flat rate at their latest anniversary date in June but will almost certainly exceed the limit in the following 12 months.  When do they need to leave the scheme?  Can they wait until next June (or end of Vat quarter after June)?

The HMRC guidance is not clear.  The GOV.UK site says:

You must leave scheme if:

on anniversary the turnover in last 12 months exceeded £230000, OR you expect it to in next 12 months;

you expect to go over limit in next 30 days alone.

Now VAT notice 733 does not mention anything about expectation in next 12 months. 

Any ideas?

Replies (7)

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By whatdoyoumeanwashe
15th Oct 2015 15:23

I had a client who expected a turnover of about £100k in year 1, ended up with a turnover of just under the £230k threshold in year 1, and went well over it in year 2. I took them out of the scheme at the end of the second year, when I had a full year's data showing a turnover over £230k. One can't be expected to constantly calculate rolling 12 month turnover.

I find the expectation business a bit of a farce - there must be fairly limited circumstances where HMRC could argue it was unreasonable to expect your turnover to be under £230k next year, if it was under £230k last year.

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By pauld
15th Oct 2015 17:39

Anniversary date

You only look at the annual turnover on the anniversary date of joining the scheme. For example if you joined the scheme on 2 January then each 2 January you look at your turnover over the past 12 months ended 2 January. If the limit has being exceeded, then you come out of the scheme at the start of the next vat quarter. For example if your quarters are March, June, Sept and Dec, you would start normal vat accounting on 1 April.

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By howletts
16th Oct 2015 08:59

Yes but...

Thank you, yes I understand that but why does the Gov.Uk website guidance state "or you expect it to in the next 12 months'?  This is what I think is misleading.

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Replying to kevinringer:
By Duggimon
19th Oct 2015 11:02

I wouldn't worry too much

howletts wrote:

Thank you, yes I understand that but why does the Gov.Uk website guidance state "or you expect it to in the next 12 months'?  This is what I think is misleading.

 

This isn't the first time I've seen information on the UK Gov site being misleading, they've tried to make it much more accessible to everyone to read but in making it readable it's no longer specific enough to be of practical use. You're always best referring to the legislation where possible as it shouldn't leave so many grey areas.

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By whatdoyoumeanwashe
16th Oct 2015 09:47

I agree
Does anyone know of an example of hmrc succeeding or even attempting to enforce one of their "expected future turnover" VAT rules? I'd have thought they'd find it very difficult and highly uneconomical to challenge someone's future expectations in this way.

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By pauld
16th Oct 2015 11:56

in the next 12 months?

That has to be a mistake on gov website. I thought the rule was - 'if you expect your turnover to exceed the limit in the next 30 days'

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By petestar1969
19th Oct 2015 12:00

Hmm

What's misleading is the question on the AWeb email..."When can my client leave the scheme?"

 

A client CAN leave the scheme whenever they like.

 

They HAVE to leave in circumstances which have already been discussed on the thread.

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