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does Flat Rate Scheme apply 2 Not for Profit CIC's

Does the VAT Flat Rate Scheme apply to Not for Profit Community Interest Companies (CIC's)

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Does the VAT Flat Rate Scheme apply to Not for Profit Community Interest Companies (CIC's)

I have a potential client who is a CIC and nearing the £85k VAT threshold. My question is should they register on the Flat Rate Scheme? Or just normal VAT?

I'm thinking surely FRS would not apply to a not for profit as surely the rate should be 0%? In any event, I've looked on HMRC's website and can't see a percentage rate for anything  like a CIC, not even for a charity.

 

Can anyone help?

Replies (29)

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By Accountant A
13th Nov 2019 21:53

Three years ago, you posted a question saying "I am an inexperienced bookkeeper". If that is still the case, I'm not sure why you are giving tax advice. Does your PII cover you?

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Replying to Accountant A:
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By Daybooks
13th Nov 2019 22:16

And let the trolling commence! You are so funny!

Yes I am still fairly inexperienced in certain areas - such as CIC's.

Sorry not sorry.

If you don't want to answer the question then maybe don't comment?

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Replying to Daybooks:
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By Accountant A
13th Nov 2019 22:24

Daybooks wrote:

And let the trolling commence! You are so funny!

Yes I am still fairly inexperienced in certain areas - such as CIC's.

Sorry not sorry.

If you don't want to answer the question then maybe don't comment?

I'll comment when I like.

You may be happy charging people for expertise that you don't have but I suspect the unfortunate client wouldn't be. Have you told the client that you have so little clue you are trying to cobble together some ideas by asking random internet strangers?

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Replying to Accountant A:
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By Daybooks
13th Nov 2019 22:50

Yes she knows I have no experience in CIC's. She has faith in me to find out, which I will. :-)

I'm not asking random internet strangers. I'm asking an accountancy website where, unfortunately, I have to suffer fools like you in between getting any real answers. Small price to pay though, because I do get the answers.

What you achieve in bothering me is, however, a mystery. Just go away

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Replying to Accountant A:
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By Daybooks
13th Nov 2019 22:53

ps and I charge accordingly. I don't charge heavy accountancy fees, just bookkeeping fees in line with my level of experience. Every single one of my clients knew my level of experience from the outset because I was too afraid of over-promising, but word has spread because of my tenacity and ability to figure things out.

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By JoF
13th Nov 2019 22:00

[quote=Daybooks]

''I'm thinking surely FRS would not apply to a not for profit as surely the rate should be 0%?''

What makes you think 0%?
+
What Accounting A said, great care offering tax advice when not qualified and covered.

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Replying to JoF:
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By Daybooks
13th Nov 2019 22:17

If you don't want to answer the question then maybe don't comment?

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Replying to Daybooks:
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By JoF
13th Nov 2019 22:40

It was a valid question. You give a half assed question and expect folk to give you the answer!!

You really are very objectionable aren't you in your responses here and on your other posts. How to make friends and influence people. Not.

What rate of VAT would you charge on the standard VAT scheme?

Have you never read this forum before? I can't tell you the number of times everyone says not to take tax advice from the minimum wage staff who answer the phones at HMRC.

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Replying to JoF:
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By Daybooks
13th Nov 2019 22:58

'What rate of VAT would you charge on the standard VAT scheme?'

20%? I'm talking about FRS - so it depends on the business

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Replying to Daybooks:
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By JoF
13th Nov 2019 23:41

Daybooks wrote:

''

20%? I'm talking about FRS - so it depends on the business

You are asking me what standard rate? Standard and flat - depends on the business, but you are yet to say what their business is. You have only stated what they would like it to be (which you may find then breaches the community interest part of their set up!). As has been said you need to decide what their taxable supplies are, then you can find the rate for both schemes, then you can do the calculations. You need to read the answers given instead of just reacting when you dont like something which is said, whether you consider it valid or not. NB - What has been said is very valid. Including the point about the CIC needing an Accountant - not sure how many times you need to be advised that this should be proactive at the start rather than reactive as you keep suggesting.

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Replying to JoF:
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By Daybooks
13th Nov 2019 22:28

ps I would never, EVER, give out any tax advice without being 100% certain of the answer first. I like to do my homework.

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Replying to Daybooks:
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By Cheshire
14th Nov 2019 00:11

I think you need to change where you do your homework. An internet forum should not take the place of proper CPD.

Plus if you are suggesting that one of the members on here is a fool, plus you have admitted to knowing little, how do you know that the answers you are getting are the correct ones.

Beware the hidden language in a lot of the responses. A small word such as 'a' can change a LOT in tax areas.

I also think you should re-visit your PII and check exactly what they cover because pretty sure you will find yourself substantially under insured for the areas you are questioning.

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By Matrix
13th Nov 2019 22:07

I would not let the fact this is a CIC throw you. If it is making taxable supplies then the normal rules would apply. You would need to do the usual calculations to see if there is any benefit of joining the FRS. What does the CIC do?

Edited to say that CICs aren’t the best clients since they don’t expect to have to pay tax or, indeed, us, so don’t tend to put any money aside so treat the prospect with caution.

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Replying to Matrix:
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By Daybooks
13th Nov 2019 22:21

The CIC is a social hub for young people mainly, that will offer educational activities/classes etc. It is based in Brighton and quite 'fashionable'. The aim was to make it a bit like 'Soho House' and places like that, but not as exclusive.

I understand that in terms of VAT etc a CIC should be treated mainly like a normal ltd company - it's just that I can't find the correct rate/percentage on HMRC's list. I'm guessing the best thing for me to do is phone HMRC?

Thank you for your help.

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Replying to Daybooks:
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By Matrix
13th Nov 2019 22:29

You would need to choose the flat rate which applies to the main supplies, having reviewed the costs to see if the flat rate is the optimal solution. I would not do any of this until they are a signed up client. I assume they have an accountant who files their accounts so why not discuss with them?

Also check whether any supplies are exempt.

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Replying to Matrix:
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By Daybooks
13th Nov 2019 22:44

The thing is, it is not for profit so using the normal VAT rules, I would offset any taxable purchases against income every quarter. The information shown to me estimates an annual profit of £164, therefore minimal VAT should have to be paid if the aim is to always break eve.

So surely the FRS would be unfair unless it was only 0-1%? I hope I'm making sense!

This 'client' is a friend of a friend who has not quite completed a tax year yet and unfortunately has not enlisted an accountant etc! However, with this mutual friend involved I have confidence that this is 'one to watch'. Don't worry though, I'm not getting too involved at this stage, just investigating certain points for my own learning more than anything.

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Replying to Daybooks:
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By WhichTyler
13th Nov 2019 23:46

1. 'Not for profit' is not a thing. CICs trade just like other companies and will inevitably have a surplus or a deficit every year. In fact they may well intend to make a profit so they can invest in growth and deliver more services and community benefit.
2. The FRS VAT rate to be used depends on what goods or services the trader supplies. You are not clear about this. Perhaps the client isn't either...
3. The FRS doesn't have to be 'fair'; it us up to the trader to assess whether they want to use it based on their own circumstances and cost of compliance.
3. The annual profit might be calculated after some vatable expenditure, and some non-vatable (salaries for instance) so zero accounting profit may not mean zero VAT
Hope this helps but I think you need to get some proper CPD/training on FRS and CICs if you are going to be able to do a good job for the client

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Replying to WhichTyler:
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By Daybooks
13th Nov 2019 23:56

2. According to HMRC’s website the rate should be 12% in accordance with the goods and services supplied, which seems high.
3. Up to the trader. This basically answers my question. Thank you.

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Replying to Daybooks:
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By Cheshire
14th Nov 2019 00:07

[quote=Daybooks]

2. According to HMRC’s website the rate should be 12% in accordance with the goods and services supplied, which seems high.

Why do you think this is high?

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Replying to Cheshire:
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By Daybooks
14th Nov 2019 00:17

Because it would be far less using the normal VAT rules as far as I understand.

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Replying to Daybooks:
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By WhichTyler
14th Nov 2019 00:27

Fair enough but it might be worth getting someone else to check the sums and logic...

If all their sales are taxable at 20% and all their expenses are taxable at 20% and they aren't ever going to make any money, then don't use FRS. But who is running the show if they don't have any employees? and what about business rates on the premises (not vatable) etc etc...

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Replying to WhichTyler:
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By Daybooks
14th Nov 2019 00:43

Perfect thank you. I'm sure everything will be overseen by an accountant where necessary, just investigating at present :-)

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Replying to Daybooks:
Psycho
By Wilson Philips
14th Nov 2019 09:06

Well use standard accounting. If you believe that the FRS should always cost less when compared to standard accounting then you’ve been misled.

As others have said, CIC status is a red herring. FRS rate depends solely on the nature of the goods/services supplied.

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Replying to Wilson Philips:
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By Daybooks
14th Nov 2019 09:40

Thanks. I don't believe FRS should always be less than standard accounting, but I would hope there wasn't such a vast difference.

I'll phone HMRC as the goods/services supplied is not listed on their FRS page on their website. Then I can get calculating. I posted on here because I wondered if there were difference rules for CIC's because, as you say, they are a bit of a red herring.

Thanks for your help.

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Replying to Daybooks:
Psycho
By Wilson Philips
14th Nov 2019 09:49

I agree that if all supplies are standard rated then one should not expect a significant difference, suggesting that the rate chosen is too high. You have sort of explained what the CIC "does", but exactly what form does its VATable income take? eg membership subscription, or what?

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Replying to Daybooks:
RLI
By lionofludesch
14th Nov 2019 16:59

Daybooks wrote:

Because it would be far less using the normal VAT rules as far as I understand.

You don't have to use the FRS.

If using it means you pay more VAT, don't use it.

Lots of businesses are in that situation.

You're not being picked on.

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Replying to Daybooks:
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By Tax Dragon
14th Nov 2019 06:40

Daybooks wrote:

Up to the trader. This basically answers my question.

Only now do I realise that you were asking whether the FRS was mandatory.

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RLI
By lionofludesch
14th Nov 2019 07:40

WTF has the Flat Rate scheme got to do with profit ?

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chips_at_mattersey
By Les Howard
14th Nov 2019 17:43

Is the CIC actually supplying educational activities? If so yo could check whether it is an eligible body for the purposes of the exemption.
If so, then perhaps it doesn’t need to register. And, if it were to register, the FRS would not be a good idea.
I do recommend, in line with my colleagues, more detailed professional VAT advice.

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