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VAT Flat rate scheme

  • 35 posts
  • # 53869

Hi Everyone
I am hoping that someone can answer a query for me.
One of my clients has just registered for the VAT flat rate scheme  and his new rate will be 9%. I know that he can't reclaim the VAT back from his purchases and am i am posting his sales invoices as normal with the VAT at 20%.
My query is when i have posted all of the transactions and worked out the difference in VAT  where would i post the difference to.
Thanks
stephen
  • 698 posts
  • # 53870

What system are you using Stephen

  • Forum Moderator, South East & Greater London Regional Chairman

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  • 698 posts
  • # 53872

The generic answer:- (In my humble opinion)

Post the Sales invoices and credits in the usual way

I.E. Net to Sales, VAT to VAT control

Purchases should also be posted in a similar way except rather than posting the VAT to the VAT control it should go to an Expenses Code.

I personally would label the expense code as "Irrecoverable VAT"

When you work out the VAT due based on the gross sales * 9% post the difference between the VAT charged to customers and the VAT declared to HMRC to an other income account "Saving on VAT rate %"

The above may seem a conviluted way of doing it as you could post all your purchases Gross however by doing it as set out above you will see if you are gaining or loosing being on the flate rate scheme.

hope that is of some help to you. 

  • Forum Moderator, South East & Greater London Regional Chairman

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  • 698 posts
  • # 53873

Duplication therefore deleted



Edited at 17 Jan 2011 04:16 PM GMT

  • Forum Moderator, South East & Greater London Regional Chairman

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  • 35 posts
  • # 53880

Hi Stuart,
Thank you for your reply.I am using sage for this client. I will have a go st doing it the way that you have suggested.
Thanks
stephen 
sarah
  • Companion Fellow PM.Dip
  • Practice Licence
  • 1137 posts
  • # 53881

Hi Stephen 

What version of sage our using, as version 2011 deals with this issue and works the benefit and loss for you , you enter everything as normal and it calculates it when you are doing the Vat Return.  You change the Company preference in the Vat Tab to either Flat rate Invoiced Based or Flat Rate cash based .   The Vat Wizard allows you to post the benefit or loss to you chosen P&L account.  It is quite a good system because if  you do say two returns or 3 returns and you are making a loss , then you should consider that using the Flat rate scheme is not the best for your client.  

Out of interest  do usually have a gain, as every time I look at over a period of 6 months my clients would make a loss.  I am just wondering what your experience is.

 

  • Sarah Douglas C.FICB

    HouseTree Business Ltd 


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  • 698 posts
  • # 53882

Sarah

Like you over the years the majority of clients i have dealt with on the flat rate scheme have not benefitted from it. Especially if you pay rent on a premsises which is Vatable and most of your purchases are vatable.

  • Forum Moderator, South East & Greater London Regional Chairman

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  • 35 posts
  • # 53884

Hi Sarah and Stuart.
 I am using sage 50 but it is only the 2010 version. The client is a courier company with no premises and very few overheads his main expense is his diesel. I have yet to do a VAT return for him using the flat rate scheme as he only started it on the 1st of January but it will be interesting to see if he does make a considerable saving or not.
Thank you for your advice i will let you know the outcome

Thank
stephen 
  • Member PM.Dip
  • Practice Licence
  • 21 posts
  • # 69862

Stuart Wildman said:

“Sarah

Like you over the years the majority of clients i have dealt with on the flat rate scheme have not benefitted from it. Especially if you pay rent on a premsises which is Vatable and most of your purchases are vatable.

”
Hello, I just wanted to say that one of my clients has just changed over to the flat rate scheme and will save a considerable amount over the course of this year.  If the client's purchases are quite low and they are not paying VAT on rent (e.g. an architect or structural engineer who mostly produces drawings rather manufacturing or buying and selling, while sending out a large number of invoices a month) then I think the flat rate can be very beneficial because they are not doing a large amount of purchasing to offset how much VAT they are paying every quarter.  The flat rate does provide a real benefit in this situation.

I'm sure in lots of other businesses where a lot more purchasing goes on then it does not like you say!  Best wishes, Elspeth
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