Hi just a quick question on something that's confusing me. Do you record expenses on a gross basis or on net of vat basis on the flat rate scheme?
Thanks
Stuart
I record the gross income in the accounts and the VAT paid to HMRC is an allowable deduction for tax purposes. You either record the VAT as an expense or deduct it from the turnover.
Expenses are also recorded gross.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
This is taken directly from HMRC's VAT Notice 733: Flat Rate Scheme for Small Businesses
"7.8 How do I prepare business accounts for income tax purposes while I am using the Flat Rate Scheme? It is expected that accounts for businesses who are using the scheme will be prepared using gross receipts, less the flat rate VAT percentage, for turnover and that expenses will include the irrecoverable input VAT.
For both VAT and income tax purposes, there is a requirement to keep a record of sales and purchases. But, for businesses using the scheme, that record does not have to analyse gross, VAT and net separately. The records need only be complete, orderly and easy to follow.
See Notice 700/12 Filling in your return for further details."
So when you are recording your expenses for normal accounting/income tax purposes, as Leger says, you record them gross.
