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"Profit" from using the VAT Flat Rate Scheme

Posting "profit" from using the VAT Flat Rate Scheme

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I have a client who just changed accounting. The amount on the opening balance sheet on Creditors was described by previous accounting as "Flat Rate income received in advance".

It is the "profit" obtained from the use of the flat rate VAT scheme. More precisely, it is the difference between the VAT on sales (20% that the company collected from customers) and the VAT that the company paid to HMRC by using the flat rate VAT scheme.

My question is whether the previous accounting correctly showed such a profit?

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RLI
By lionofludesch
12th Nov 2021 18:59

Jeez - let me just lick my finger and see which way the wind's blowing.

If I were guessing, I'd say it's the liability on payments in advance at the last balance sheet date.

Why don't you just ask the predecessor what the hell he means ?

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Replying to lionofludesch:
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By Paul Crowley
12th Nov 2021 19:29

Jeez
You have a DeLorien
Answer time is before question time

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Replying to Paul Crowley:
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By Paul Crowley
12th Nov 2021 19:32

Me too
Timer on Aweb must be on the blink

19.50 per question as is

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Replying to Paul Crowley:
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By Tax Dragon
12th Nov 2021 19:44

I guess OP forgot to put the clock back last month.

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Replying to Paul Crowley:
RLI
By lionofludesch
12th Nov 2021 19:50

Paul Crowley wrote:

Jeez
You have a DeLorien
Answer time is before question time

Probably why I've been so successful.

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Replying to lionofludesch:
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By Violettine235
15th Nov 2021 07:56

The previous accounting explained it in the same way as I described in the question.

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By Paul Crowley
12th Nov 2021 19:27

It should not be on the balance sheet
It was a profit last year and taxable last year

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Replying to Paul Crowley:
RLI
By lionofludesch
12th Nov 2021 19:54

Paul Crowley wrote:

It should not be on the balance sheet
It was a profit last year and taxable last year

I dunno. Is it VAT on debtors and the taxpayer is on cash basis for VAT?

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Replying to lionofludesch:
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By Paul Crowley
12th Nov 2021 20:14

" It is the "profit" obtained from the use of the flat rate VAT scheme. More precisely, it is the difference between the VAT on sales (20% that the company collected from customers) and the VAT that the company paid to HMRC by using the flat rate VAT scheme. "

I assumed this was a change to the original OP.
That is why I looked at the eggtimer

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Replying to Paul Crowley:
RLI
By lionofludesch
12th Nov 2021 23:11

True, the OP has been changed. But I still think it's a timing difference to do with VAT cash basis.

Alternatively, predecessor doesn't know what he's doing.

Both very plausible imho.

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chips_at_mattersey
By Les Howard
13th Nov 2021 09:31

This is the relevant HMRC direct tax guidance: www.gov.uk/hmrc-internal-manuals/business-income-manual/bim31585

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Replying to leshoward:
RLI
By lionofludesch
13th Nov 2021 09:59

The wording is very vague and unclear but, either way, it needs including this year.

Unless it's big enough to be worthwhile amending last year's accounts.

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Replying to lionofludesch:
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By Paul Crowley
13th Nov 2021 12:15

Same here
Last year wrong but just tax it this year and all is OK

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