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VAT Flat Rate

Council Grants

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If a client is on flat rate VAT, should the recent Job Retention & local council grants be counted towards his quarterly income?

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RLI
By lionofludesch
13th Jul 2020 10:15

I vote no.

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By unclesam
13th Jul 2020 13:53

Many thanks

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Replying to Chris.Mann:
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By unclesam
13th Jul 2020 13:53

Thanks very much

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By Paul Crowley
13th Jul 2020 13:12

I am less certain.
FRS works on business income, not VATable income.

Do not believe the politicians would have even considered this issue

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Replying to Paul Crowley:
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By Wanderer
13th Jul 2020 13:20

Quote:

FRS works on business income, not VATable income.

Think the issue here is more related to the distinction between Exempt or Outside the scope of VAT.
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Replying to Paul Crowley:
RLI
By lionofludesch
13th Jul 2020 13:29

Quote:

I am less certain.
FRS works on business income, not VATable income.

Do not believe the politicians would have even considered this issue

There was a big thread on this a few weeks ago with a landslide vote in favour of Outside the Scope.

It's not about business income, it's about what supply has been made.

I would suggest that nothing has been supplied.

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Replying to Paul Crowley:
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By unclesam
13th Jul 2020 13:52

Many thanks Paul. My own view is the same as the rest of the respondents.
These grants are NOT income. They are just compensation for lack of activities, or in the case of Job Retention scheme, just a compensation for employees' costs

Thanks for your views

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By fawltybasil2575
13th Jul 2020 16:13

Whether the two income streams at issue [CJRS (Furlough) and “Rates grants”] are within the parameters of INCOME for the purposes of the FRS scheme turns entirely upon whether those two income streams are within S.26B of VAT Act 1994 – here:-

https://www.legislation.gov.uk/ukpga/1994/23/contents

Whilst ‘CJRS (Furlough) and “Rates grants”’ ARE “INCOME”, they are NOT income within S.26, since subsection (2)(c) prescribes that only TAXABLE and EXEMPT SUPPLIES are within FRS.

Neither CJRS income nor Rates Grants are Taxable or Exempt Supplies, and hence debate as to whether they are (i) “Supplies Out of the Scope of VAT” or alternatively (ii) not “Supplies” at all, is rendered redundant.

Basil.

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Replying to fawltybasil2575:
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By Wanderer
13th Jul 2020 15:00

Quote:

whether they are (i) “Supplies Out of the Scope of VAT”

Can't see who was arguing that? I certainly wasn't.
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Replying to fawltybasil2575:
RLI
By lionofludesch
13th Jul 2020 15:04

Surely, Basil, the distinction is whether a payment is a "supply" or merely "income"?

They're not necessarily the same thing at all.

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By fawltybasil2575
13th Jul 2020 15:54

@ Lion.

Forgive me, but I must have not expressed my last post with clarity.

It is gainsaid that:-

(i) a “supply” and “income” are not synonyms, and
(ii) both income streams at issue are “income”.

I was merely seeking (clearly inadequately) to summarise the overall position, by pointing out that VAT is only payable, under FRS, on SUPPLIES which are (a) taxable and/or (b) exempt [thereby excluding both (1) “Outside the Scope Supplies” and (2) Income streams which are NOT “Supplies” at all].

Basil.

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By unclesam
14th Jul 2020 15:48

Thanks for everyone's contribution
I have just received the following text from HMRC Admin & thought I might share it with you:

Hi,
Grants are outside the scope of VAT and would not be included in the flat rate turnover when completing a VAT return.
Please refer to section VATSC06311 of the VAT Supply and Consideration manual for further information on grants:
https://www.gov.uk/hmrc-internal-manuals/vat-supply-and-consideration/va...
Please also refer to section 6 of VAT Notice 733 ‘Flat Rate Scheme for small businesses’ for guidance on how to work out your flat rate turnover:
https://www.gov.uk/government/publications/vat-notice-733-flat-rate-sche...
Thank you.

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Replying to unclesam:
RLI
By lionofludesch
14th Jul 2020 16:48

So what we thought, then.

Still, nice to have HMRC's agreement.

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