Hello There, I wondered if anyone on here was able to advise me at all.
I am in the process of working out my partners income for the last tax year in order to do his self assessment.
Half way through last year he became VAT registered so therefore his invoices and income through his account reflect this.
However if I put the whole invoice amount as his income then we will end up paying tax on the VAT part of the invoice when in fact we gave this straight to hmrc. Is this right? Its doesnt sound right but I'm not sure what to do.
Sorry if this sounds very thick I;m sure its straight forward but I cannot get my head around it.
You collect VAT on behalf of HMRC. This money is passed to HMRC minus any VAT incurred wholly, necessarily and exclusively in running the business.
The VAT is NOT part of your income and in fact does not belong to you at all. (You are merely collecting the money on behalf of the government).
Your financial reporting and tax calculations do not normally include the VAT amounts. They include only the amounts that belong to your business.
The rules are different if you use the flat rate scheme where you would show the VAT through the income statement.
Under the flat rate scheme some win and some lose out.
If you've adopted the flat rate scheme approach then VAT will come into the calculation when calculating your tax liability.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
don't suppose that you know your freinds user name do you?
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Looking forwards to finding out who my secret fan club is.
Actually, just out of interest, just read your name.
Probably just putting two and two together and coming up with five. You don't have to say who you are on here but do I know you?
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
