VAT treatment of Self-Employment Tax

VAT treatment of Self-Employment Tax

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Hello

If a person is sole trader and voluntarily VAT registered and say he sells a good for £100 + VAT; and the cost of sale is £50+VAT; then when calculating his self assessed tax, does he include VAT i.e. £120 less £60 = £60 therefore tax on this would be £12; or is it net of VAT so £100 less £50 is £50 and therefore tax is £10

Ignore personal allowances etc

Replies (6)

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chips_at_mattersey
By Les Howard
20th Apr 2013 21:35

VAT and tax

When you do your Accounts, all the figures are net of VAT. Any VAT balance will appear in your Balance Sheet. In your. example, tax is £10, not £12.

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Replying to johnjenkins:
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By MissAccounting
22nd Apr 2013 09:24

Worrying

Russell Huk wrote:

 

Hello

If a person is sole trader and voluntarily VAT registered and say he sells a good for £100 + VAT; and the cost of sale is £50+VAT; then when calculating his self assessed tax, does he include VAT i.e. £120 less £60 = £60 therefore tax on this would be £12; or is it net of VAT so £100 less £50 is £50 and therefore tax is £10

Ignore personal allowances etc

It is pretty worrying that someone who appears to be a working in practice (judging by your previous posts) has to ask this sort of question.  Have you never prepared a set of VAT registered accounts before?

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Replying to charlotte_mason:
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By Russell Huk
22nd Apr 2013 15:18

The boss eventually checks everything over but I try to be proactive to minimise his input.... I also find that I get better answers here taht make me think about the issues rather than my boss correcting me without explaining the issues.  Thanks for your input anyway.

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By johnjenkins
22nd Apr 2013 09:34

It is also worrying that perhaps someone is

doing VAT inclusive accounts. As VAT is not an allowable expense it would have to be added back in the tax comps.

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By johnjenkins
22nd Apr 2013 09:53

Why on earth

would anyone want to do VAT inclusive accounts when VAT has nothing to do with profits or accounts. It is just a balance sheet item.

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By johnjenkins
22nd Apr 2013 10:16

I think we are talking

a bit at cross purposes. Obviously those tax payers who aren't vat registered will have accounts prepared inclusive of VAT. I have never prepared accounts inclusive of vat for registered tax payers nor do I know anyone who has.

In fact as the VAT is payable on sales and reclaimable on certain expenses I don't see how the accounts would be correct. The profit figure would be the same, yes, but the make up of the P&L would be wrong.

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