First Previous - Page 1 of 1 - Next Last

Flat Rate VAT Scheme

  • 33 posts
  • # 70935

Hello

I have a client who is registered for the flat rate vat scheme.  I have 2 questions;  Would the flat rate turnover include his 20% deduction of CIS?  How would you record how you worked out the VAT?  I have read on the revenue website that you need to keep a record in your vat account of
1.  The flat rate turnover you used.
2.  The percentage you used
3.  How much to pay.

Of course you can keep a record of how much to pay in the vat liability code, am confused on the others.

Please help!  It's confusing me a little.

  • 153 posts
  • # 71097

VAT needs to be calculated as 20% of the the gross invoice amount ie before CIS has been deducted, regardless of VAT scheme.

So if he invoices his client £100 before VAT, the total invoice will be £120 including VAT (ie £100*1.2). £20 will be deducted for CIS, being 20% of £100. Thus the net amount received will be £100.

Thus for a flat rate scheme the turnover amount is the £100.

Hope that helps....it was all a bit clearer when VAT and CIS were different rates!!

  • 33 posts
  • # 71116

Hi

Thank you for your reply.  I was beginning to think that no-one knew the answer.

So what you are saying is, the VAT needs to be calculated after the 20% VAT has been added and the 20% CIS deduction taken off?

Thanks
Jeanette

  • 153 posts
  • # 71138

I'm not quite sure what you mean!

Think about what CIS is - it is simply part of the builder's pay which isn't paid to him but is paid to HMRC for him, in respect of his personal tax liability.

So when working out VAT, don't make any deductions for CIS, just work with the figure from before the CIS deduction is made.

The builder's invoices would break down like this eg:

10 hours @ £10 per hour = £100
Plus VAT @ 20%               = £20
Total invoice                     = £120

Less CIS @ 20% of pre VAT value = £20

Net amount to pay                        = £100

Looking at it the other way around:

If you know that the builder was paid £100 (that's the cash, cheque or whatever that he actually received) and a deduction for CIS was made of £20, then his invoice total was for £120.

The VAT amount is £120/6 ie. £20

  • Member PM.Dip
  • Practice Licence
  • 117 posts
  • # 71148

The VAT payable over to HMRC will be a % of the VAT gross - in Ruth's eg £120 (before CIS dedn).

Therefore if the FRS % was 14%, VAT payable over to HMRC will be 14% of £120 = £16.80.  (On the invoice the VAT will still be £20 of course)

Once you set up a spreadsheet with the right formula it will all fit into place!

  • 33 posts
  • # 71164

Thank you very much, both of you, for your replies. 

What you both put is what I thought, but just wanted to clarify.  The flat rate scheme is new to me.

So going forward are the sales in the profit and loss going to be less the 20% VAT or less the flat rate percentage?

Thanks Jeanette Laughing

  • 153 posts
  • # 71169


Sorry I got so preoccupied with where CIS sits within it all that I forgot to clarify the flat rate issue!

Sales will be total invoiced less total VAT paid ie in the example above £120 - £16.80 ie. £103.20

  • Member PM.Dip
  • Practice Licence
  • 117 posts
  • # 71176

Yep, £103.20.

In the p+l I usually set up a seperate account, just for clarity:

Sales            120.00
FRS VAT         (16.80)
Total income 103.20

But that's just me.

  • 33 posts
  • # 71255

Hello

Thank you both for your help.  That's a good idea of yours Andrew in setting up another account in the p&l.  I think I will start to do that.

Thanks again
Jeanette

First Previous - Page 1 of 1 - Next Last
bottomBanner
loading