Turnover included in flat rate cash basis calc

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All,

Apologies for the simple question to follow!

I have just joined the Flat Rate scheme operating on a cash basis as of 1st April 18. In this first VAT return for QE June 18 i have received payment for 2 invoices as follows:

1) Invoice date 06/03 for Feb work and payment received 09/04

2) Invoice date 11/04 for March work and payment received 16/05

Which would be included in my flat rate calculation for the June return?

Thanks in advance

 

Replies (22)

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JCACE
By jcace
25th Jul 2018 09:14

What were your VAT status and accounting method before 1 April?

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Replying to jcace:
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By topgear1991
25th Jul 2018 09:33

Hi

We were not Vat registered.

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By Ruddles
25th Jul 2018 09:50

When was the March work completed and did you add VAT to the invoice?

What is the nature of your work?

These are questions that ought to be asked by your accountant. If you don’t have one, get one. VAT, of all taxes, is one of the least suited to a DIY approach.

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By fawltybasil2575
25th Jul 2018 12:42

@ topgear1991 (OP).

The direct answer to your question is that neither of the two invoices should be included in the calculation of the turnover for FRS purposes, for the opening quarter to 30 June 2018.

That same answer would equally apply incidentally if you do not apply the "cash-based" turnover rules for FRS.

The reason for my answers as above is that the goods and/or services (presumably services as per my next paragraph) were supplied prior to the date of registration.

From your previous contributions to AWEB, I surmise (albeit this is not 100% certain) that you are in fact yourselves accountants.

Noting Ruddles' having asked when the "March work" was completed, I have assumed that such expression has its normal meaning of work completed on or before 31 March 2018.

Basil.

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Replying to fawltybasil2575:
By Ruddles
25th Jul 2018 14:29

What if the services are continuous?

What if a VAT invoice was raised within 14 days of the basic tax point? (Which would have been a rather foolish thing to do)

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By fawltybasil2575
26th Jul 2018 11:03

@ Ruddles.

To respond to your post at 14.29 yesterday, IMHO neither aspect impacts upon the basic principle espoused in my last post, namely (and logically so) that supplies before the registration date cannot result in VAT being payable thereon.

Basil.

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Replying to fawltybasil2575:
By Ruddles
26th Jul 2018 12:42

What is the date of supply of a continuous service, Basil?

What is the tax point of a taxable supply where a VAT invoice is raised within 14 days, Basil?

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By fawltybasil2575
27th Jul 2018 00:54

@ Ruddles.

With respect of course, pursuing the "14 day rule" and the "continuous supply of services" regulation takes one down a blind alley.

The reason is that one has first to "pass first base", i.e. Regulation 55C(2).

Supplies prior to the opening date of the FRS are automatically outwith the calculation of the turnover for the first VAT period; and hence consideration of the 14 day rule and continuous supply of services is rendered redundant.

Basil.

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Replying to fawltybasil2575:
By Ruddles
27th Jul 2018 07:47

You’re missing the point, Basil. How do you determine the date on which the supplies have been made, for VAT purposes, in the 2 situations I refer to?

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By topgear1991
27th Jul 2018 08:05

Appreciate your responses and can see where you are all coming from.

Just to clarify a couple of points I've seen above. The services provided were consultancy services I.e. services provided for March were completed by 31 March but unfortunately not invoiced until April- which would have made this cleaner. Vat was not charged on this invoice as it related to work carried out pre vat reg, though not completely sure correct.

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Replying to topgear1991:
By Ruddles
27th Jul 2018 08:36

Thanks - in which case you shoul probably exclude them

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By fawltybasil2575
27th Jul 2018 22:38

To respond to Ruddles' post at 07.47, I am NOT missing any point.

On the basis of the OP's question [and, for completeness, on the basis that the assumption in my first post above was correct (which appeared to be implicit in the initial question)] the invoices per (1) and (2) of that question should NOT be included in the turnover for the purposes of the calculation of the FRS liability -REGARDLESS of whether (i) the 14 day rule or (2) the continuous supply of services regulation apply.

Such indeed was the essence of my last post.

Basil.

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Replying to fawltybasil2575:
By Ruddles
27th Jul 2018 23:03

Based on the information now supplied by the OP I agree that the invoices should probably be excluded. As such there is no point in debating the issue further but you clearly misunderstand the rules that might otherwise have applied re continuous services. There’s no question that supplies made before registration and/or start of FRS should be excluded but in order to identify such supplies you need to identify the date of said supplies. And the date of supply of a continuous service is what, Basil?

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By fawltybasil2575
28th Jul 2018 00:32

@ Ruddles.

With respect of course, I do NOT misunderstand the continuous supplies of services regulations, and I have no doubt that you also do not misunderstand them.

However, I have specifically (in an earlier post) indicated the key Regulation [Reg. 55C(2)] and why it is important.

In intending no offence, the accepted protocol (if you believe that there is other specific legislation which renders Reg. 55C(2) inapplicable) is to (i) identify that other legislation and (ii) explain how/why that other legislation over-rides Reg. 55C(2).

Asking ME [for now the third time :)] to tell YOU "the date of supply of a continuous service", AFTER I have explained MY view that such date is not relevant, is a little odd. If YOU are able to hypothesise a continuous service scenario, and to also indicate what you consider to be the correct supply date in that scenario, then please do so - BUT, having done so, it is then incumbent upon you to explain how the quantum of the resultant turnover figure (for those services) impacts upon Reg. 55C(2).

Basil.

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Replying to fawltybasil2575:
By Ruddles
28th Jul 2018 09:50

Oh for goodness sake. You’ve simply referenced a piece of legislation without attempting to explain its relevance in the context of time of supply rules.

Reg 55C(2) merely says that a supply made when the person is not a FRS trader is not a FRS supply. Rather stating the obvious. But in order to determine whether or not the supply was made at a time when the person is a FRS trader you first need to establish when the supply was made. Again rather obvious I would have thought. So I’ll ask you for a fourth time - what, for VAT purposes, is the time of supply of a continuous service? You claim that it’s irrelevant, while it is in fact fundamental.

I will answer your question, though - the relevant legislation (which does not over-ride 55C(2) or render it inapplicable but operates alongside it) is Reg 90). For the avoidance of doubt, I agree that the amounts in question in this case should be excluded. But only on the basis of the subsequent information provided by the OP - you were fortunate that your assumptions were correct.

You asked for an example:-

Trader making continuous supplies registers for VAT on 1 April 2018, joining FRS. He issues a payment request on 2 April 2018 for services provided during the period to 31 March 2018. He receives payment on 7 April 2018. Payment request is not a VAT invoice so Reg 90 treats the payment on 7 April as a discrete taxable supply made on that date. It is therefore liable to VAT and Reg 55C does nothing to over-ride that. Now please explain, with legislative authority, if and why you disagree with that analysis.

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By fawltybasil2575
28th Jul 2018 13:11

@ Ruddles.

I am grateful for your explaining your "sitting alongside" theory which, with respect of course, I believe you should have put forward much sooner in the thread. I shall explain below (my third paragraph) why I believe that interpretation is incorrect.

I simply don't have the time or energy (or indeed the inclination)) to respond to each point in your post [I would no doubt be berated by others for lack of succinctness :)], especially as you have simply repeated points which I have addressed earlier in the thread. The key lies in the established principle of placing a purposive construction on the legislation.

Reg.55C, as you will recall, was one of the Regulations added to the 1995 Regulations later. In my view, when referring, in 55C(2), to the requirement to ignore a "supply" made PRIOR to the start of the FRS, that legislation can only logically be interpreted as referring to supplies ACTUALLY made prior to the start of the FRS. The fact that Reg.90 DEEMS a supply to have been made (for the purposes of the continuous supply rules) on or after the start of the FRS, on the example given by you, IMHO does NOT "drag" that deemed supply into the calculation of the turnover for FRS purposes.

If one steps back from the matter, it would indeed be entirely INCONGRUOUS for an FRS VAT liability to arise on actual supplies made BEFORE the start date of FRS (and indeed in this case before the start of the registration).

One COULD put forward a case for saying that Reg.55C(2) is in direct conflict with Reg.90. If such conflict exists then, applying the purposive construction principle, Reg. 55C(2) MUST prevail.

Basil

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Replying to fawltybasil2575:
By Ruddles
28th Jul 2018 13:20

You do make me chuckle, Basil.

Having demanded legislative authority for my argument you’ve now moved on to YOUR interpretation of how you think the law ought to be applied.

Since you refuse to answer my question we’ll leave it at that. None of this argument is likely to be of any use to the OP.

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Replying to fawltybasil2575:
By Ruddles
28th Jul 2018 14:20

Duplicate

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By fawltybasil2575
28th Jul 2018 19:18

@Ruddles,

For the avoidance of doubt, I stand by all the comments which I have made above, the legal position being IMHO as per my last post.

It was clear, several posts back, that the discussion was now an academic one, as the opposing views of your good self and me had no effect on the OP's particular case.

Having explained several times why your question was NOT relevant, your berating me for not answering it is a touch obscure (regardless of the fact that asking a question to which you knew the answer, and to which you would have known I also knew the answer, did not help matters) - I let you down gently :)

The key point is Reg.55C(2), which IMHO either (i) over-rides Reg.90 (as I believe) or (ii) could be considered to conflict with Reg.90 (not a view with which I agree but if it there us indeed such conflict, then Reg.55C(2) would "win the day" on purposive construction grounds).

Basil.

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Replying to fawltybasil2575:
By Ruddles
28th Jul 2018 20:14

Blah blah blah

You've told me that my question was not relevant, but have failed to explain why. Your reluctance to answer it is very telling.

It is common ground that supplies made before registration are not chargeable to VAT. It is also common ground that supplies made before the FRS is joined are outside FRS. And that is ALL that Reg 55C(2) seeks to confirm. It neither over-rides nor conflicts with any other provisions or principles.

In order to determine whether a supply is made before registration (or before joining FRS) one first needs to establish the date on which the supply is made. Reg 90 settles that question in the case of continuous supplies. Your continued insistence that this somehow conflicts with Reg 55C(2) is just making you look foolish. My argument is based on what the legislation says. Yours seems to be based on what you think that some judge might say.

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By fawltybasil2575
28th Jul 2018 22:48

@Ruddles,

Forgive me, but I can't engage on that level (your opening line set the tone - I "gave you the benefit" in relation to a couple of your previous posts). I have sought throughout to express my opinions, which are clearly contrary to yours (but without adopting caustic comments).

I stand fully behind the comments in my previous posts, but respectfully disagree with those parts of your last post which differ therefrom.

I fully respect the sincerity of your (contrary) views, whilst retaining my own. Thank you.

Basil.

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Replying to fawltybasil2575:
By Ruddles
29th Jul 2018 09:50

Fawlty by name, ...

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