My question is how to account for the difference between the standard VAT rate and the amount which pay to HMRC using a 9% flat rate? I suppose I need to increase the taxable income with the difference.
And for the expenses - can I enter the gross amount using No VAT? So, for example, if I have an invoice for £60, including VAT, can I use it, or should I use only £50? Thanks for the help.
Record gross then adjust. Or net and adjust. Think about double entry. Some info here www.gov.uk/hmrc-internal-manuals/business-income-manual/bim31585 If you are still unsure about double entry due to not being a bookkeeper then speak to your Accountant who will happily help.
-- Edited by Taxagent on Friday 13th of August 2021 06:47:41 PM
Welcome to the forum. Does it make a difference if they're a Ltd Company? I've recorded gross for 9 months and then they switched to standard vat for the final 3 months, but I seem recall that under the FRS I should have recorded it nett from the beginning. I've made a start changing it but it's a slow process.
Apologies for jumping on your thread Alex. Welcome to the forum to you as well.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
"For the businesses using FRS, the Revenue expects annual accounts to be prepared using gross sales receipts less VAT paid to HMRC, expenses should be shown inclusive of VAT as they would be for any unregistered business, this means that any VAT savings achieved as a result of using the FRS will form part of the business profits and therefore charged to tax"
In VT I record the gross sales invoices and then journal in the FRS to pay at the end of the quarter for the VAT return
-- Edited by Artois on Friday 13th of August 2021 07:57:02 PM
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
FRS in my post meant FRS105 not flat rate scheme. According to section 24.11 of FRS105 you should use nett figures for the income, as far as I understand it, then add the "profit" but I'm a little confused regarding expenses. Should this be nett or gross, as the VAT is irrecoverable? Seems to say record as gross for the likes of fixed assets etc so presumable that means nett for p&l items, but I might have misunderstood that.
Section 24.11 says "Turnover included in profit or loss shall exclude VAT and other similar sales taxes on taxable outputs and VAT imputed under the flat rate VAT scheme. Expenses shall exclude recoverable VAT and other similar recoverable sales taxes. Irrecoverable VAT allocable to fixed assets and to other items separately recognised shall be included in their cost where practicable and material"
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Sorry John on my phone on a train at the moment so not sure what happened to the formatting on my last reply
Basically this is the way I was taught by CIOT
Gross sales including VAT minus the VAT paid to HMRC gives your taxable income
Expenses are VAT inclusive on the P&L as you would with any unregistered business as the VAT is unrecoverable
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
