Sorry I'm being very demanding today but I have another question
My client is vat registered and on the flat rate and has supplied goods to another EC member state. Am I correct in thinking that when I fill out his vat return I exclude the vat due percentage on these EU sales invoices in box 1 , include the sales in box 6, and put the value of the sales to EU in box 8?
HMRC Notice 733, para 6.4 indicates that B2C EC sales must be included in the FRS turnover; and the VAT included in Box 1.
If they are B2B sales, then I think they should be excluded, as the place of supply is outside the UK.
To answer your question, if the goods are sold to a non taxable person in another EU country your client ought to charge UK VAT on the sale, and as Les said such sale is treated as a UK sale (up to distance selling threshold where the supplier is responsible for transportation). Where the goods are sold to a VAT registered person this would be treated as an Inter-community dispatch and should be zero-rated, provided zero-rating conditions are complied with. For the VAT return purposes, you must include all EU sales both to non taxable and VAT registered persons in the flat rate scheme turnover. I thought it would be easier to give an example:
Let's say the good are sold to another EU member state: £1200 to an individual, this includes VAT at standard rate, and £10000 to a VAT registered business, zero-rated amount. The total = £11200 Assume the flat rate is 12%
Box 1. 1,344
Box 6. 11,200
Box 8. 10000
I don't actually deal with flat rate scheme very often so I would be grateful if other specialists here check my figures, but I hope you got the idea.
Thanks
-- Edited by JulieS on Saturday 21st of November 2015 12:03:12 PM
Thank you for this. I think this is what I have, can you just check it for me please. Client has sold goods to a vat Reg business in Ireland and I have verified their Vat no.
Goods sold to Ireland £4000 no vat charged on invoice, total turnover for the quarter £20,000 , assume flat rate 12%
The amount in Box 1 is the total to which you need to apply your flat rate.
£20,000 x 12% = £2,400.
I assume, £4,000 is included in the total £20,0000.
Unfortunately, you need to apply the flat rate to the EU dispatches as well even though they are zero rated.
So the amended VAT return amounts should be as follows:
Box 1 2,400 (12% of what is in Box 6)
Box 6. 20,000
Box 8. 4,000
Are you saying then that even though my client didn't charge vat on the invoice to Ireland he will still have to handover 12% to the vat man? ....That can't be right surely ? How would anyone make a profit doing that? Surely no one would want to do business outside the UK, or am I missing something?
While Julie has correctly pointed out the need to include that EU sale in the flat rate calculations, if you don't understand the reasoning then (as you expressed) it sounds wrong. So it's perhaps worth expanding on why:
The flat rate scheme operates with different percentages applied to different business sectors; those percentages are based on figures collated by HMRC over however many years from returns submitted by businesses in those sectors.
Essentially, they've determined that for a business in a given sector the VAT payable is typically x% of their turnover including EU sales - so the flat rate for that sector is set at x% of the turnover including EU sales. You therefore need to include those sales, otherwise you are likely to be underpaying VAT.
However, that's based on the assumption that all businesses in the same sector typically have the same level of EU sales as a percentage of their overall turnover - which might not necessarily be so. If you feel that the amount of EU sales you are making is higher than is typical for your industry, you need to consider whether the flat rate scheme is right for you.
What you (and anyone keeping books for anyone on a flat rate scheme) should probably be doing is keeping a track of what the VAT would look like if you weren't on the flat rate scheme, and comparing the amounts that would be payable to HMRC with what you are actually paying. That way you can see instantly if what you are paying is more than you it would otherwise be.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I personally would be double checking if FRS is the best option. Selling goods, generally means purchasing goods.. if that's the case, does this stock have VAT charged on it? Is the FRS making a saving in comparison to normal VAT? Just a thought :)
