I have a new client who is about to register to VAT, but not sure if the flat rate scheme would be better for them. They are a sign makers (print banners, advertising posters, decals for vans etc, and occasionally flyers/booklets). I think they fall under printers, which would be 8%. They've only just started and we have predicted around £100k turnover.
So how does it work? They charge customs normal 20% or 0% (leaflets etc), then pay hmrc 8% of turnover, plus claim capital expenses over £2000. What about vat for overheads like rent? Is that disregarded?
The only input tax which can be claimed is on capital items where the gross value of any item exceeds £2,000. Notice 733, para 15.2 explains this.
You can also claim input tax from before the date of registration, subject to the rules for those. Notice 700, chapter 11.
Hi Lyndsey
The VAT guides are really useful and a must read. Also - its worth doing an exercise based on flat rate and standard to check which will be best for them especially as they may have some zero rated supplies and I would imagine a fair amount of input tax on purchases.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Yes you have it right in that you pay 8% of the turnover.........this would be 'gross' turnover, not net of VAT. Are you aware of the 1% discount in the first 12 months? I haven't checked your category, but if 8% is the normal amount, then you're entitled to claim 7% for the first 12 months.
It's a good scheme to go on initially, as it's easy to move your client from the flat rate scheme to the standard scheme if you realise that it turns out they're not on the right scheme - but it's not possible the other way around!
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Carol Saunders Lady of Ledger Book Keeping Telford, Shropshire
It's a good scheme to go on initially, as it's easy to move your client from the flat rate scheme to the standard scheme if you realise that it turns out they're not on the right scheme - but it's not possible the other way around!
I was aware it wasn't possible the other way round!! Can you provide a link for this/advise on where this is in the vat regs/guides please.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
It appears HMRC have made it possible to join AND leave easily now - https://www.gov.uk/vat-flat-rate-scheme/join-or-leave-the-scheme
yes, and to rejoin FRS after 12 months of leaving......
there doesn't appear to be the same restrictions that they used to have either - i.e. materials couldn't be more than 15% of the turnover etc??? I didn't make that up did I - I'm sure that's what it used to be.
It's not like HMRC to make things easier than they used to be us it
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Carol Saunders Lady of Ledger Book Keeping Telford, Shropshire
