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Leaving the VAT flat rate scheme

Do you still have to tell HMRC you are leaving if you are leaving due to reaching the threshold?

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Do you still have to tell HMRC you are leaving if you are leaving due to reaching the threshold? The advice at https://www.gov.uk/vat-flat-rate-scheme/join-or-leave-the-scheme seems to suggest that you need to write to them irrespective of the reason you are leaving. 

Just want to double-check. 

Thanks

Replies (22)

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By paulhammett
31st Jul 2019 11:18

Yes, you do need to notify HMRC by letter if you are breaching the limit and they will then confirm your leaving date.

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By exceljockey
31st Jul 2019 11:50

@paulhammett thanks for the clarification.

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RedFive
By RedFive
31st Jul 2019 12:25

Good luck with that.

I wrote to them to remove a client from flat rate 2 months ago and no reply yet.

No doubt they are all dealing with MTD issues that no one predicted.

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Replying to RedFive:
RLI
By lionofludesch
31st Jul 2019 13:16

What are you expecting ?

You remove yourself (or the client). You write to HMRC to say you've done it.

No permission required - especially if you're withdrawing because you're over the limit.

Thanks (2)
RedFive
By RedFive
31st Jul 2019 15:40

What are you expecting ?
QUOTE
"You remove yourself (or the client). You write to HMRC to say you've done it.
No permission required - especially if you're withdrawing because you're over the limit."

Hmm.

I've done a few of these (especially when they brought in the Limited Cost Trader status a few years back and all without exception received a letter stating the date of withdrawal from FRS.

In fact I recall one of them with an incorrect date of withdrawal (they used the following quarter end date) so I wrote again quoting section 12.1 and received an apology (!) and confirmation of the original requests withdrawal date.

I wouldn't like to argue at a VAT inspection that they were no longer on it just because I had sent a letter.

Proof of posting is not proof of receipt.

I've checked my past missives from 2017 and they all took around 2 weeks to respond. Oh those were the days.

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Replying to RedFive:
RLI
By lionofludesch
31st Jul 2019 16:04

So you realise you're over the limit, you tell HMRC, they don't respond, your next VAT return is due, what do you do ?

a. Stay with the FRS and pay several hundred quid less than you should, or

b. Switch to input/output accounting and risk getting some sort of penalty ?

Thanks (1)
Replying to lionofludesch:
RedFive
By RedFive
31st Jul 2019 16:16

Indeed that would be the quandry.

And when they responded in under a month, provided one wrote in good order at the start of the quarter then there was plenty time to resolve.

Now that all HMRC staff have absconded (sic) to the Brexit Bunker via the MTD cesspool there is no one left to hear me scream.

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Replying to RedFive:
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By StephenGuy
05th Aug 2019 10:30

So HMRC reply to your letters "without exception". Lucky you! Like you we've done a few of these and HMRC have never acknowledged our letter. I assumed they treated everybody with the same abominable rudeness.

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By Matrix
31st Jul 2019 17:14

When clients left the FRS due to the new limited cost trader rules, HMRC advised that you just needed to write. You don’t need to wait for an acknowledgement and I don’t believe any is sent. So write with the date of change and stop using the scheme.

Thanks (1)
Replying to Matrix:
RedFive
By RedFive
31st Jul 2019 17:39

Did you not bother to read my reply to Lion then?

Were my letters from Mrs Miggins pretending to be from HMRC?

I normally like your replies (and Lions) but you are both wrong and I don’t know why you are both just guessing when it’s easy to check.

It says so on the interwebs (which the OP could have just looked up)

And I have letters to prove it (not from Mrs Miggins).

>>>>>>>

How to leave

You can choose to leave the scheme at any time. You must leave if you’re no longer eligible to be in it.

To leave, write to HMRC and they will confirm your leaving date.

>>>>>

If I was a judge I would go with that at Tribunal, not “well the nice man on the AWeb forum said I didn’t need a reply”.

And yes I know Gov.uk does not have force of law, but still........

Though I agree you just get on with it I stand by needing an acknowledgement as otherwise the numpties could just use any old date of leaving they wanted. As they did, discussed in reply earlier.

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Replying to RedFive:
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By Matrix
31st Jul 2019 21:29

Sorry I have no direct experience - the only experience I have was when you could actually speak to someone on the helpline. I guess we are just saying that it would be more prudent to operate the standard scheme than the FRS so I would just put a date and revert on that date. I admit I have not read the rules on leaving FRS but I don’t see why you would expose a client to staying in the scheme.

Thanks (1)
Replying to Matrix:
All Paul Accountants in Leeds
By paulinleeds
05th Aug 2019 22:19

Two years ago with the FRS and Limited Cost traders, I wrote o HMRC on around 5 clients and then another a few months latter. Never received a reply even though I asked for one!

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Replying to paulinleeds:
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By StephenGuy
06th Aug 2019 17:33

That's my experience too.

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Replying to StephenGuy:
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By Matrix
08th Aug 2019 20:56

Did you bother to read Redfive’s reply to Lion?

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By fawltybasil2575
31st Jul 2019 18:49

@ exceljockey (OP).

The HMRC guidance to which you have provided a link being somewhat misleading/incomplete, and since the rules re leaving the FRS scheme compulsorily are often misunderstood, could I ask you to answer the following questions:-

(1) The date of joining the scheme,
(2) The projected future annual turnover figures (i) at the date of joining the scheme and (ii) at the most recent anniversary date,
(3) The date from which the client intends to leave the scheme (implicit in your question is that this will be a “compulsory leaving” date),
(4) The projected future annual turnover figures at today’s date,
(5) The turnover figure from the most recent anniversary date to the present date,
(6) The VAT stagger periods,
(7) The opening and closing dates of the last VAT return submitted.

Approximate figures will of course suffice.

Basil.

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Replying to fawltybasil2575:
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By exceljockey
01st Aug 2019 14:33

@Basil - thanks for taking the time to respond. Judging by your questions seemingly leaving the FRS is more complicated than is easily discernable from the website.

(1) The date of joining the scheme, 1 July 2008
(2) The projected future annual turnover figures (i) at the date of joining the scheme: £80,000
and (ii) at the most recent anniversary date: at 1 July 2019 - £200k - A new client was taken on during July accounting for the difference in projected T/0 over the course of the month.
(3) The date from which the client intends to leave the scheme (implicit in your question is that this will be a “compulsory leaving” date): intentioned leaving date is when they have to as it a compulsory decision rather than a preference - T/0 will go above £230k with August billings
(4) The projected future annual turnover figures at today’s date: £250k to £300k
(5) The turnover figure from the most recent anniversary date to the present date: £20K (1 July to 31 July 2019)
(6) The VAT stagger periods: Stagger 1 (MAR, JUN, SEP, DEC)
(7) The opening and closing dates of the last VAT return submitted. 1.4.2019 - 30.6.2019

Happy to provide further information.

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RedFive
By RedFive
31st Jul 2019 18:56

I love it when Basil gets involved.

Over to you exceljockey and be aware you are in the presence of vat aweb royalty.

Happy to be corrected on my musings too.

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By fawltybasil2575
02nd Aug 2019 12:54

@ exceljockey (OP).

Thanks for your response post at 14.33 on 1 August 2019.

Firstly, the FRS733, here:-

https://www.gov.uk/government/publications/vat-notice-733-flat-rate-sche...

is much better guidance than the HMRC “advice” per the link in your initial question. Scroll down to 12.2 and 12.3 to see a clearer explanation of the rules.

If I understand your post correctly, the total income in the year to 30 June 2019 was below £230K.

Your client can therefore continue to use the FRS, and does not need to consider the total income figures again, until 1 July 2020 (except in the very unlikely exceptional event that, in the meantime, the projected future total income will exceed £230K in the next 30 DAYS ALONE).

At 1 July 2020, your client should calculate the total income for the year to 30 June 2020. If it has not exceeded £230K, then your client has a “clear run” for another 12 months until he has to carry out the next “anniversary date review” (on 1 July 2021).

However, if the client establishes at 1 July 2020 that the total income HAS exceeded £230K, then he must (subject to the caveat below) discontinue use of the FRS with effect from 1 OCTOBER 2020 [NOT from 1 July 2020 – look carefully at the wording of the right-hand column of 12.2(a)].

To explain the “caveat” in my previous paragraph, and please see 11.2 of FRS733, if (when carrying out the “anniversary date review”) one has reason to believe that the expected future total income will not exceed £191,500, then one can APPLY to HMRC to be allowed to continue with the FRS (it is not sufficient to simply believe it, without notifying HMRC – 12.2 sets out other conditions, which normally one should be able to comply with).

From the figures in (3) and (4) of your post, it seems probable that, at 1 July 2020, your client WILL need to leave the FRS with effect from 1 October 2020. If of course, approaching 1 July 2020, the total income is likely to be “borderline” (re the £230K threshold) then one has to consider, subject of course to not breaching tax point rules, whether one can legitimately “reduce” total income in May/June 2020 (or perhaps “postpone” it from (say) June 2020 to July 2020), albeit one must as ever weigh the potential VAT savings therefrom against the other commercial effects.

I trust this helps.

Basil.

Thanks (2)
Replying to fawltybasil2575:
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By exceljockey
08th Aug 2019 14:07

fawltybasil2575 wrote:

@ exceljockey (OP).

Thanks for your response post at 14.33 on 1 August 2019.

Firstly, the FRS733, here:-

https://www.gov.uk/government/publications/vat-notice-733-flat-rate-sche...

is much better guidance than the HMRC “advice” per the link in your initial question. Scroll down to 12.2 and 12.3 to see a clearer explanation of the rules.

If I understand your post correctly, the total income in the year to 30 June 2019 was below £230K.

Your client can therefore continue to use the FRS, and does not need to consider the total income figures again, until 1 July 2020 (except in the very unlikely exceptional event that, in the meantime, the projected future total income will exceed £230K in the next 30 DAYS ALONE).

At 1 July 2020, your client should calculate the total income for the year to 30 June 2020. If it has not exceeded £230K, then your client has a “clear run” for another 12 months until he has to carry out the next “anniversary date review” (on 1 July 2021).

However, if the client establishes at 1 July 2020 that the total income HAS exceeded £230K, then he must (subject to the caveat below) discontinue use of the FRS with effect from 1 OCTOBER 2020 [NOT from 1 July 2020 – look carefully at the wording of the right-hand column of 12.2(a)].

To explain the “caveat” in my previous paragraph, and please see 11.2 of FRS733, if (when carrying out the “anniversary date review”) one has reason to believe that the expected future total income will not exceed £191,500, then one can APPLY to HMRC to be allowed to continue with the FRS (it is not sufficient to simply believe it, without notifying HMRC – 12.2 sets out other conditions, which normally one should be able to comply with).

From the figures in (3) and (4) of your post, it seems probable that, at 1 July 2020, your client WILL need to leave the FRS with effect from 1 October 2020. If of course, approaching 1 July 2020, the total income is likely to be “borderline” (re the £230K threshold) then one has to consider, subject of course to not breaching tax point rules, whether one can legitimately “reduce” total income in May/June 2020 (or perhaps “postpone” it from (say) June 2020 to July 2020), albeit one must as ever weigh the potential VAT savings therefrom against the other commercial effects.

I trust this helps.

Basil.

Hi Basil. Thank you very much for your response, that's very helpful indeed. Much obliged.

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By pauljohnston
05th Aug 2019 10:13

On behalf of us all thanks Basil.

How to make a simple question a nightmare - congratulations to HMRC

Thanks (2)
Stephen Quay
By squay
05th Aug 2019 15:48

Not relevent to OP but useful for emailing HMRC FRS team. Having attended an HMRC webinar around March 2017 just before the FRS reduced cost basis changes were to be introduced from 1 April we were advised to send an email to [email protected] if the client wished to withdraw from FRS and just explain with brief details. We did this for two clients. Although we asked for confirmations of receipt none were received. However one client did tell us he'd received a letter confirming withdrawal from FRS about 10 weeks later. The other client was a poor communicator anyway. Not sure if the email address is still valid but certainly worth a try. For belt and braces you could always send it by post as well.

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Replying to squay:
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By Wanderer
05th Aug 2019 17:17

squay wrote:

Not sure if the email address is still valid ....

Still quoted here:-
https://www.gov.uk/government/publications/vat-notice-733-flat-rate-sche...
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