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Conflicting advice

2nd Dec 2010
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Hi,

Would appreciate your views on the following as getting conflicting advice:-

1. The client is registered under the Flat Rate Scheme.

2. Client has purchased services (Google Adwords) from another EU states and the invoice shows 'Subject to Reverse Charge'

3. The Client uses these services for their 'service' offering to clients in the UK.

4. Client adds an Admin fee to purchased services and then adds UK VAT to the total and invoices their client

5. How would the client account for this on their FRS VAT return?

6. How does the client pay the VAT due on the purchased services from another EU state (in this case Ireland)

If easier please use the example below.

1. The client is registered under the Flat Rate Scheme.

2. Client purchases services (Google Adwords) from another EU states and the invoice shows 'Subject to Reverse Charge' - invoice charge - £1000

3. The Client uses these services for their 'service' offering to clients in the UK.

4. Client adds an Admin fee (20%) to purchased services and then adds UK VAT to the total - Therefore client invoice £1410 made up of £1000 (Google Adwords) + £200 (Admin fee) + vat £210 (£1200 x 17.5%).

5. If this was the only turnover for the VAT period how would the client account for this on their FRS VAT return?

That is: What do they show in Box1, Box6 and Box 7?

Regards

SteveB

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By LisaDeering
02nd Dec 2010 13:52

HMRC say

"You calculate your VAT payable to HMRC by applying your flat rate VAT percentage to your 'flat rate turnover'. If you are still in your first year of VAT registration, remember to reduce your flat rate percentage by one.

Your flat rate turnover is all the supplies your business makes including all:

VAT inclusive sales for standard rate, zero rate and reduced rate suppliessales of exempt supplies, such as rent or lottery commission - you don't have to make any partial exemption calculationssales of capital expenditure goods - unless you have previously reclaimed the VAT, in which case they must be accounted for at the standard rate and not the flat rate.sales to other EU countriesbank interest received on a business accountsales of second-hand goods - but if you sell a lot of these, you may be better off leaving the Flat Rate Scheme and using a margin scheme

Don't include:

services you've purchased from outside the UK that you've had to reverse chargedisbursements - costs you pass on to your clients that meet the necessary VAT conditionsprivate income, for example income from sharesthe proceeds from the sale of goods you own but which have not been used in your businessany sales of gold that are covered by the VAT Act, Section 55 - see the link belownon-business income and any supplies outside the scope of UK VATsales of capital expenditure goods on which you have claimed back the VAT you paid"http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

My bold

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