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What flat rate % to use for software

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I am soon launching a new software product which is delivered as 'Software as a Service' (SaaS). This means it's an application which runs over the internet and is accessed via a user's browser (phone or laptop). There is nothing for the user to install. The subscription is a small monthly fee (less than £5 per user).

Obviously as it's not live yet we are not near the £85k VAT threshold, but I'm trying to plan ahead by seeing if it's best to register for the Flate Rate Scheme when we do get to £85k p.a. What I'd like to understand is what category this type of business would come under? (and therefore what %VAT rate I'd pay).

Further info: The software is based on a server in the UK- though we can move this to anywhere in the world. Initially it is only for UK customers, but we will soon expand that to US, Canada, Australia etc. So really we could incorporate in another country if that enabled us to avoid having to levy VAT in the first place.

Many thanks for your input.

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By qhas
16th Mar 2019 18:06

To save all the usual complement of subscribers who would very generously give you the following advice let me save them the effort 'Ask your accountant.'

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16th Mar 2019 18:24

I'm launching an accountancy practice soon where people who need tax and accounting advice pay a modest fee to access my specialist knowledge. What do you reckon?

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By qhas
to Accountant A
17th Mar 2019 09:20

I am of the same view as you but I can't see the point in banging on about it over and over again. It would appear to me that the forum is open to all. Only the moderators can do anything about it and they have chosen to do nothing. If I find that someone is really taking the P then I ignore it.

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By Matrix
16th Mar 2019 19:37

There are lots of issues with providing digital services so find someone who has this expertise to advise and also with international tax experience if you are setting up offshore. Although if the company is managed and controlled in the UK then incorporating offshore is of no benefit for direct tax (corporation tax).

For indirect tax (VAT) you have flagged VAT MOSS and, as for the flat rate scheme, assume 16% unless your expenditure on goods prevents you being a limited cost trader.

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17th Mar 2019 11:04

I think there's a good chance you'll be a Limited Cost Trader on 16½%.

Probably better to stick to Old School VAT.

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