VAT reduction

koru

vivatifosi wrote: »

I understand your point koru, but won't those who were sold the small business scheme on the ground that their input costs were low so they would be better off also be hit?

You mean people who (like me) make a real profit on the FRS, because their actual input VAT is a lower proportion of their sales than the average figure on which the government calculated their FRS rate? Well, they will obviously benefit less from the reduction in the VAT rate on their inputs.

However, I don't think they can reasonably complain about this, because the government never marketed the FRS as saving you VAT; it is officially only about compliance cost reduction. So, if you were getting an unintended benefit from the FRS and that unintended benefit has now reduced a little, I think you have to shrug your shoulders.

Moreover, depending on the business's flat rate and how much it has now reduced, they might still be better off under the new rates, even without any benefit on the inputs side. (As shown by my example calculation.)

koru

Pennywise wrote: »

FRS retail traders are worse off, especially due to the timing. They've already bought their christmas stock and paid 17.5% vat on it. Now, they're expected to sell it at a lower price. Virtually all their sales over the next 4 weeks to xmas will be for stock bought at 17.5%. It will only balance out as suggested when they buy new stock, which is fairly unlikely at this time of year as they won't be stocking up straight after christmas, especially in recession. They may benefit slightly in Jan 2010 if they put up their prices again for stock they bought at 17.5% but they're unlikely to be selling much in a January anyway.

I agree retailers seem to end up worse off, although the government claims that this is because the old rate assumed a higher level of inputs than is in fact typical for retailers. If they are right, then retailers should still be better off staying in the FRS, unless the retailer has poorer margins than the average retailer.

andymanuk

I am also worse off by 1 % on every invoice I raise !!
Thanks Darling .....

longforgotten

You can (on V11 of Line 50 anyway) also set up T10 (or any spare number) as a 15% code and tick the box so that it is included in the return. This should make it easier to handle the mish-mash of old and new rate invoices which will be arriving over the coming weeks.

McAzrael, if you take this route you will need to change your default tax code to T10, as otherwise T1 (17.5%) will keep turning up. Don't forget some ( or all ) of your existing customers and suppliers will have been set up as T1(17.5%) so you will continually have to change the tax code for months to come if you go with T10 as 15% without changing your default........

I think Sage is advising changing T1 to 15% and creating a new 17.5% tax code. Don't need to change anything for customer or supplier records then.

vivatifosi

In general you are right koru, however in my case I wasn't able to work for a while due to illness and still had my input costs, I was kind of relying on the rate staying at 17.5% to balance this out.

Slinky

koru wrote: »

So, if you were getting an unintended benefit from the FRS and that unintended benefit has now reduced a little, I think you have to shrug your shoulders.

Hmmmm I may have to think about putting up my net prices. I went VAT regd 18 months ago and the extra profit I was making meant I haven't put my prices up for 2 years as I was happy with the level of extra income the VAT was bringing me.

Can't see a price rise being popular with my customers any time soon!