I have a client who has been advised after their first year of trading that they must register for VAT but that because their customers are mainly non VAT registered people they need to pay a flat rate of 7.5%.
I have set them up on Sage in the settings as flat rate cash based at 7.50% but not sure where to go from here. Do I set up a new Vat code in the tax code configurations? eg T6 - 7.5% and then put through the gross amount and calc vat?
I'm getting myself in a bit of a muddle with this, so if anyone can help I would be grateful.
This doesn't change the rate at which your client will charge VAT to their customers - still 20%. What it does mean is that they don't have to account for VAT on all their costs and will pay a flat rate of their sales over to HMRC. The flat rate depends on the type of business.
So no need for a new Sage VAT code at 7.5%, sales will go through at T1 etc as appropriate to the type of sales.
You post the invoices as normal with T1 code and while you run the VAT return, sage calculates VAT accordingly. Note: Post all the purchases as T9. VAT on purchases can't be reclaimed unless the purchase is more than £2,000
I would also like to flag that, since this is the first year you would get an additional 1% discount on your FRS VAT. I have looked at VAT percentages and 7.5% FRS is for "Retailing that is not listed elsewhere" category. If this is the case then for the first year your FRS VAT is 6.5%
Please find the link below and go through the following sections: Discount in your first year of VAT registration Claiming back VAT on capital assets
