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HMRC Flat Rate Scheme

29th Oct 2010
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Vat quarter : 31 December 2011

31/12/2011: I explained at the telephone at the end of a typical quarter trading that it is necessary with any vat registered business to calculate vat payable as a percentage of turnover (this quarter your vat using the normal method is £3,500/£37,500 (gross turnover) = 9.33% of turnover quarter ended 31/12/2011.) and so investigate if the flate rate scheme is appropriate to the business.

Advantages

I have investigated the flat rate scheme for vat and after consultation with HMRC yours fall into the the category of 9.50% for hotels (periods beginning beginning from 01012010 until 03012011.)

If 9.50% you pay £37,500 x 9.50% = £3,562.50 and so you would have a tax vat saving of (£50.16) with all the accompanying savings of costs of not having quarterly vat returns prepared.

Disadvantages

However, if the business is entertaining then the rate is 11% costs and so output vat would be £37,500 x 11% = £4,125.00 and so would be a cost to the business of £4,125 less £3,500 = £625.00 payable to HMRC.

 

(I must complete HMRC form VAT 600 (Application to join the Flat Rate Scheme) and wait for verification from HMRC. )

Therefore, sometimes the flat rate scheme works and sometimes it does not but it is always worth monitoring these ratios and preferably quarter on quarter.  it helps too in monitoring your price structures.

It goes without saying that I complete this task for all clients that have vat registered businesses.

davidbarryaccountants.co.uk  0208252 7018/07877671423

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