Vat

Vat

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Our client offer typically two types of services, the first being consulting services in reducing respect of personal guarantees to companies and private individuals. The second type of service is introducing finance deals to the banking industry and finance houses, where you receive a commission from them for the introduction. 

The first we understand is a vatable supply and second is exempt, are we firstly correct? Our client is likely to exceed the Vat registration limit of £77K shortly and are wondering how the input tax is accounted for? We are also considering the Flat Rate Scheme.

We would welcome any thoughts as it is a little while since we have done a mixed supply case.

Thanks

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By shaun king
01st Mar 2013 09:30

Partial Exemption

From the limited informatioon provided it is impossible to determine the VAT liability of the supplies being made. You should look at Notice 701/49 which should help you determine liability of the supplies.

 

Assuming the latter supply is exempt from VAT, then under conventional VAT accounting you can recover any VAT incurred which is directly attributable to making taxable supplies and you cannot recover any VAT on any costs directly attributable to making exempt supplies. Any non attributable VAT will be recovered according to Partial Exemption Standard method (value based transaction) Notice 706. You will then need to consider whether you are de minimis enabling you to be treated as fully taxable and able to recover all the VAT incurred.

You will find that the Flat Rate Scheme is disadvantageous if generally the value of the exempt supplies is greater than the value of taxable supplies although you will need to do a quick calculation as there is a 'tipping' point where advantages of FRS disappear.

Hope this gives you a starting point

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By refs8
01st Mar 2013 18:37

Thanks yes it does

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