Does anyone have experience of these? I have taken on a new client who runs a pet shop. Some of the products he sells are standard rated and some zero rated.
His till doesn't seem to have any way to manage VAT codes or rates, therefore the POS method seems to be out.
I am looking at one of the apportionment methods, but heres the question. How do I calculate the percentage for each. All he has are the z listings from the till, and purchase invoices. Is it ok to say that say 20% of the things he buys in a quarter are zero rated, therefore 20% of things that he sells must also be?
Or is it, as I fear, slightly more complex?
To add to this, he has been running almost a year, and has broken the VAT threshold a few months back. How are HMRC likely to deal with this?
There's more than one way of calculating the apportionment, but your logic is along the right lines.
Method 1 - you go by the proportion of purchases that the client has made and apply the same proportions to the sales in order to calculate the VAT, but if the client is achieving higher profit margins for zero-rated sales, then they may pay more VAT... Method 2 - you work out the expected selling prices (ESP) of standard & lower-VAT-rated goods you receive for sale and the ratios of these to the ESPs of all goods received for retail sale and apply that ratio to the client's sales. You can't mix apportionment methods, but you can use the Apportionment method with certain other VAT schemes (such as the POS scheme - assuming he can get his till to do the necessary...)
Anyway, have a read of VAT notice 727/4, if you haven't already, which goes into all the detail.
If he's exceeded the threshold, he'll obviously have to account for VAT going back to the date when he should have registered. Inform HMRC as soon as possible, there's likely to be penalties, but if you deal with it quickly, that will help (the penalties are time-related). Details of the late VAT registration, the penalties, migitating circumstances, appeals etc... are contained in VAT notice 700/41 (penalties are 5% of the VAT due, if notified within 9 months, 10% of the VAT if notified between 9-18mths and 15% over 18mths late (all subject to a minimum penalty of £50)
By the way, there's a VAT amnesty at the moment - your client has until 30 Sept to notify HMRC if they wish to take part in the amnesty... www.hmrc.gov.uk/ris/vat/
I did the VAT returns many years ago for a newspaper shop. Each quarter I'd calculate what proportion of purchases were zero rated and standard rated and apply that to the sales. I think at the end of the year you're also meant to do a calculation for the whole year and make any adjustments needed.
__________________
Never buy black socks from a normal shop. They shaft you every time.
