I have question about VAT in restaurant and catering business. as most food bought is zero rated, restaurants have enormus VAT costs. Can anyone suggest any scheme? How does this flat rate scheme works.
1. You apply a flat rate % to your gross taxable sales. eg if you gross sales are £100k and you fall within % bracket 12% then you would pay over £12k.
2. You dont reclaim any VAT on your purchases. Unless you have large capital purchases of more than £2k gross when you can claim the VAT.
3. Your turnover must be expected to be less than £150k(net) in the next 12 months for you to be able to join. You need to leave if your turmover goes over £230k.
4. Different business sectors fall into different % bands. For instance the % rate for restaurants is 12.5%. That is 12.5% of your gross taxable sales would be how much VAT you would need to pay over.
Thanks for fast respond. But what about when your turnover exceed threshold of £150 but the actual profit is pretty low. Are there any schemes for such cases. As I mention above, it's restaurant and they have most f purchases VAT 0 rated while sales are all standard rate. I would be very grateful for reply. Many thanks!
No specific schemes for restaurants other than the normal
Quarterly (invoice or cash)
Monthly
Annually
In your example then say the following
Sales £200k
Costs £190k
Profits £10k
This is low profits but the sales is net so effectively the gross sales are £240k. Assume that all costs are paid this would leave £50k in the bank as all sales should be paid as no credit given in restaurants usually. Will use £40k to pay over the VAT and be left with £10k. Provided you ensure that you dont spend the VAT on sales (which is easier said than done) you shouldnt run into any problems.
You have to think that the extra 20% VAT that you add on really isnt yours and should be put aside for the VAT man ie set us a separate bank account and put 1/6 of income every month into that. (again easier said than done)
