I asked this in another thread but those with kindly replied were more concerned with whether I qualify, so asking again in the hope someone may be able to provide an answer?
I teach specialist online art courses to professional artists worldwide and use a lot of expensive materials (8% of my turnover per year) so will qualify to pay a flat rate VAT.
My question is what percentage of flat rate I should be paying. I cannot see in the gov list anything that seems relevant.
Yes my accountantuis on the case but I'm asking as I have very quickly reached the VAT threshold, three months ago wasn't expecting to for another six months at least but the power of the internet........
Replies (21)
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Have you misunderstood the flat rate scheme?
Normally, you charge VAT on your income and offset it with the VAT you incur on your inputs and pay the difference to HMRC.
Under the flat rate scheme, you still charge the full 20% on your outputs, ignore VAT incurred on inputs and pay a fixed % to HMRC.
If you are delivering courses to clients around the world, you *may* have a lot of zero-rated or outside scope supplies. This means that FRS wouldn't be suitable for your business.
In addition, your online courses get you into one of the most difficult/confusing areas of VAT, especially given that art tuition potentially cover both business and consumer customers.
I commend your desire to get it right. You really need advice from a VAT specialist - your accountant may not have the expertise.
You said you provide courses to 'professional artists'. That doesn't sound like B2C.
This isn't an area of VAT where you can get straightforward answers from a internet forum. It's not a case of exploring options: you need advice from a VAT specialist.
And if you've hit the registration threshold in a couple of months, you can probably afford it.
If you are working with professional artists, I would expect your sales will be B2B. If so, then the FRS is not likely to be helpful to you.
It took several rounds of questions from respondents before you told us what you did. This is why such questions are best addressed to your own accountant. They already know about your business.
You have wasted everyone's time by simply saying you are doing online courses without stating this pertinent fact. Since you are now doing this on Monday, when you should be able to contact your alleged accountant, I have trouble believing they exist.
Heres the really useful list
Note as paul.benny has warned you need to make sure you understand the full concepts here. Note none of the categories are as good as they may seem at fisrt glance as the flat rate is calculated on vat inclusive turnover.
I suspect if you primarily do training you may be in business services not listed elsewhere - that would be 12% (1% discount first year of registration taking you to 11% temporarily)
https://www.gov.uk/hmrc-internal-manuals/vat-flat-rate-scheme/frs7200#ID...
Lets crunch te numbers on 12%
Sales £1000 net + £200 vat (you still charge 20% vat !!!!!) = £1200
Flat rate vat payable £1200 * 12% = £144 (14.4% of net invoice value before vat !!!)
Normal vat = £1200 * 92%= £1104 * vat fraction (1/6) = £184 vat due on sales less cost of sales (presuming vat billed on cost of sales items)
However on normal vat you can alos claim vat on other buisness expenses so you would need to calculate other expenses on which vat paid as % of sales.
If we say 20% of gross income goes on other vatable expenses that would be 1200 * .2 = 240 * 1/6 = £40
oh that works out at exact breakeven - not a fix i promise - hopefully thats a starter for 10 as to how things may work - if you are other vatable expenses light i supect flat rate may be beneficial - if you are other vatable expenses heavy then normal vat may be better.
No need to choose flat rate till you are ready to submit your first return.
Note if you acountant is decent they will be right on the ball in this regard - its probably a decent test of their skills how proactive they are here. Work is involved though doing the calcs so if you are wanting to do your own vat and are trying to avoid fees you may not get full chapter and verse from your acocountant!
https://www.accountingweb.co.uk/any-answers/flat-rate-vat-e-courses
Not really a new question
Best left to the 'accountant'
BIGGEST CRITICAL MATTER LEFT OUT
'Now a company'
So only company sales matter
clock for VAT restarted with company
When did company start trading?
I would further note that the flat rate percentages are broad brush (if you'll pardon the pun) figures. With supplies as expensive as yours, it is quite likely that any flat rate that would fit would be costly to you. Again, an accountant that knows your business would be able to confirm this.
https://www.gov.uk/hmrc-internal-manuals/vat-flat-rate-scheme/frs7200 has an extended list of trades and sectors.
You perhaps fit under the definition of "education" which is 12.5%, or you can go with "any other activity not listed elsewhere" which is 12% and I doubt HMRC will have much issue whichever you decide.
The flat rate descriptions haven't been updated in years, so it is not always the case of finding an exact fit to what you are doing., which is why there has always been an "any other activity not listed" definition.
Are you even sure that you are in scope for VAT?
Private tuition of subjects ordinarily taught in a school or university is Exempt. It's a while since I was at school, but art was definitely on the curriculum then.
You need a VAT specialist (did I say that already?).
"Private tuition of subjects ordinarily taught in a school or university is Exempt"
I would have said MAY be exempt rather than is Exempt ! - 701/30 section 6 has further details.
Sorry I don’t know the answer to the flat rate question but I would get bespoke VAT advice on all of the points raised, even if they did not address your question.
Which supplies have you included as taxable supplies you are making when you determined that you had reached the threshold? You don’t include supplies which are outside the scope of VAT.
.. yes its complicated
and
Really? I didn't know that
That's why:
You need advice from a VAT specialist
an accountant that knows your business
I would get bespoke VAT advice on all of the points raised
Since you don't seem to want to heed that advice, I'm out.