Leaving VAT FRS

Does client need to leave?

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Hi 

Hopefully a quick one, client has has a letter from HMRC which says as turnover exceeds 230k he needs to leave the FRS.

The turnover figure on the returns includes the disposal of a van at its gross sale proceeds of 12500k which if taken out of the calculation would bring him comfortably under the 230k 

He paid FRS vat on the disposal as he had did not claim VAT on the purchase.

HMRC guidance looks like sales of capital assets are ignored for the purpose of the 230K test 

https://www.gov.uk/guidance/flat-rate-scheme-for-small-businesses-vat-no...

Can any one confirm i am reading the guidance correctly 

Thanks 

Replies (6)

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RLI
By lionofludesch
18th Jul 2023 13:33

It's a long webpage. Which bit are you reading?

You'll obviously have already told HMRC about the capital sale (which at less than 5% of the threshold is not what I'd call "comfortable") - what did they say?

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Replying to lionofludesch:
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By rmillaree
18th Jul 2023 13:51

"You'll obviously have already told HMRC about the capital sale (which at less than 5% of the threshold is not what I'd call "comfortable") - what did they say?"

I would guess hmrc would be oblivious to the sale of capital assets - so although they will have the total - they will be presuming its just normal turnover unless you reply with letter slapping them in the face.

Couple of minor issues - never forget 230k is vat inclusive - its somewhat confusing as 150k threshold isnt vat inclusive so hmrc aim to confuse!

Separately vat office may write out in year removing clients from flat rate scheme in error - if they have done that i would normally politely point out they should not be doing check till relevant anniversary date is reached - albeit if capital asset sales are only item pushing client over limit i would be sure to point that out too - with frs its shocking bad due to length of time they take top answer most basic items - ie cofnirm that its their stupidity letter was sent in the first place

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Replying to lionofludesch:
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By rmillaree
18th Jul 2023 13:51

"You'll obviously have already told HMRC about the capital sale (which at less than 5% of the threshold is not what I'd call "comfortable") - what did they say?"

I would guess hmrc would be oblivious to the sale of capital assets - so although they will have the total - they will be presuming its just normal turnover unless you reply with letter slapping them in the face.

Couple of minor issues - never forget 230k is vat inclusive - its somewhat confusing as 150k threshold isnt vat inclusive so hmrc aim to confuse!

Separately vat office may write out in year removing clients from flat rate scheme in error - if they have done that i would normally politely point out they should not be doing check till relevant anniversary date is reached - albeit if capital asset sales are only item pushing client over limit i would be sure to point that out too - with frs its shocking bad due to length of time they take top answer most basic items - ie cofnirm that its their stupidity letter was sent in the first place

Thanks (1)
Replying to rmillaree:
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By jonibarnes
18th Jul 2023 14:43

Thanks, Yes HMRC do not know about the sale of the capital asset as it just goes in the box with net sales on the return.

With regards to calculating the turnover to the anniversary date HMRC cannot have done this as they do not have the split on the VAT return (ani date is 1/6 return goes to 30/6)

The time to respond is a problem as I am guessing that even if I reply this week the next return will be due before we get a response.

Last time I dealt with the FRS department I was waiting approx 6 months to hear back

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Replying to jonibarnes:
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By rmillaree
18th Jul 2023 15:36

you should just proceed on basis its as laid out in guidance - if eligible to stay on just explain exactly why whilst pointing out they have clearly done check at wrong date and presume their request is invalid.

really annoying when they keep making same repeat mistakes and wont admit they are wasting their our clients and our time - doubly so if turnover would be back below naturally at anniversary date. Shocking poor they wont even admit their own errors within 9 months when they have them pointed out ! - deffo worth complaint as apprropiate that they know they are sending out letters too early

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Replying to jonibarnes:
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By jonharris999
19th Jul 2023 07:52

I would still just write and ask them to reverse the expulsion from FRS - I did have one of these back in only a few weeks, recently.

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