Imports flat rate vat and vat leakage

Imports flat rate vat and vat leakage

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I had it in my head there is vat leakage when importing goods when on flat rate if you didnt do it the right way.

Brain freeze has left my memory unable to remember full details.

Would i be correct in saying that by postponing vat on to vat return you get a  vat saving - not sure if thats due to the fact you only need to perhaps pay the flat rate on the output declaration ? or summit like that. 

Anyone with better memory than me about? 

 

Replies (6)

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By Wanderer
01st Feb 2022 15:48
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Replying to Wanderer:
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By rmillaree
01st Feb 2022 16:04

Cheers just what i needed

am i misisng something ref example below ?

in one method you pay 200 import vat
when postopeing 75 goes in box 1

is that not a saving of 125 not 25? - guessing i am missing something in my haste here

Example. I import some goods for my flat rate business. £1,000, import VAT is £200 and freight agent pays this/recharges me, so I end up paying £200 VAT and not able to reclaim it under FRS.

lets say I'm using "retail not listed elsewhere" at 7.5%.... HMRC are suggesting I declare 7.5% on the value of the import in Box 1, which is £75 and I can't reclaim that in Box 4 but I've saved £25 by postponing the VAT at my flat rate percentage rather than at 20%.

Thanks (0)
Replying to Wanderer:
avatar
By rmillaree
01st Feb 2022 16:04

Cheers just what i needed

am i misisng something ref example below ?

in one method you pay 200 import vat
when postopeing 75 goes in box 1

is that not a saving of 125 not 25? - guessing i am missing something in my haste here

Example. I import some goods for my flat rate business. £1,000, import VAT is £200 and freight agent pays this/recharges me, so I end up paying £200 VAT and not able to reclaim it under FRS.

lets say I'm using "retail not listed elsewhere" at 7.5%.... HMRC are suggesting I declare 7.5% on the value of the import in Box 1, which is £75 and I can't reclaim that in Box 4 but I've saved £25 by postponing the VAT at my flat rate percentage rather than at 20%.

Thanks (0)
VAT
By Jason Croke
01st Feb 2022 20:10

https://www.gov.uk/guidance/complete-your-vat-return-to-account-for-impo...

"If you’re using the Flat Rate Scheme for small businesses and are accounting for import VAT on your VAT Return, you must add the value of the imported goods to the total of all your supplies, before you do the scheme calculation"

The above link then refers to another link
https://www.gov.uk/guidance/how-to-fill-in-and-submit-your-vat-return-va...

"This scheme allows small businesses an alternative to the normal method of accounting for VAT. Under this scheme you can work out your VAT by applying a flat rate percentage to your total turnover (including VAT).

Box 1 VAT due on sales
To calculate the VAT due under the Flat Rate Scheme, you must apply the flat rate percentage for your trade sector to the total of all your supplies, including VAT.

Include imports that are due in this period through postponed VAT accounting.

This includes your supplies at the standard and reduced rates and any which are zero-rated or exempt. You may have other output tax to include in the box such as the sale of capital expenditure goods on which you’ve claimed input tax separately while using the Flat Rate Scheme.

You should also use this box to record transactions that are subject to the reverse charge (see paragraph 4.6).

Box 4 total input VAT
If you use the Flat Rate Scheme you do not normally make a separate claim for input VAT, including any VAT on imports or acquisitions, as the flat rate percentage for your trade sector includes an allowance for input VAT.

But you can recover VAT on any single purchase of capital goods of £2,000 or more, including VAT, and VAT on stocks and assets on hand at registration. For details, see VAT Notice 733: Flat Rate Scheme for small businesses.

You should also use this box to claim bad debt relief and to account for reverse charge transactions (see paragraph 4.6)."

So to me, it looks like you declare import VAT in Box 1 and there is no corresponding recovery in Box 4 unless the value of the goods is more than £2,000, whereupon you would then include in Bo x4 and reclaim in full.

Thanks (1)
VAT
By Jason Croke
01st Feb 2022 20:13

I hasten to add that HMRC have since updated their guidance since the topic/thread on AccountingWeb last year. Such is the beauty of VAT, always moving and changing.

Thanks (1)
VAT
By Jason Croke
01st Feb 2022 20:17

Also, if any of the posters ever want to chat through these VAT threads, happy to take a call/private message, VAT is often a moving buffet and what was okay yesterday can be different tomorrow. Brexit was such a mixture of guess work and fact, thankfully all of the Brace for Brexit stuff is still true/valid so we called that right, some of the finer stuff like this flat rate query has since been clarified thanks to HMRC updating their guidance.

Thanks (1)