help with VAT

buddy143

I am after some advice.
I have set up a limited company in april 2011 (turnover about £80000/annum).
applied for VAT registration straightaway in april. HMRC took quite a bit of time and I only received my registration last wk. The effective date is from 1st april 2011. It also says vat returns to be made end of oct 2011 and every 3 months thereafter.
Now I want to apply for flat rate scheme and due to send application tomorrow.
My question is will I be able to date back VAT (as per FRS) to 1st april(from when VAR reg is effective from) or not once i receive approval for FRS.

thanks in advance.

lordbase

Generally HMRC apply the FRS from the VAT quarter after they receive the registration. However you can request that it take effect from an earlier period and they will consider the circumstances.

I would suggest that in this case they would likely accept that as you have only just registered you have a reasonable justification for backdating the FRS to the start of your registration period.

HOWEVER, I would say that you should consider whether this is worthwhile as you may have had a number of initial expenses in the first quarter of trading, including the cost of legal/accountancy services, purchasing supplies and equipment and combined with that lower income which means that it may be much more valuable to you to reclaim the VAT for the first quarter (or two) before taking advantage of the FRS.

JasonLVC

I agree with Lordbase's post - due to the short time frame between you originally applying, the HRMC delay, and you getting the VAT number.....HMRC should accept your flat rate application and apply it retrospectively so suggest you insert 01 April on the VAT600FRS form.

One thing I must disagree with Lordbase on is the input tax recovery. (Sorry Lordbase, I see you're not a big psoter so don't take my post as criticism or put you off posting in future:beer:)

It is true that being on the flat rate scheme does block your ability to reclaim input tax, however, the legislation does allow a newly registered business on the flat rate scheme to reclaim all their input tax as per the normal rules.

You'll find accountants usually register a business, do the VAT reclaim on normal basis and then switch to flat rate afterwards, but it is a needless exercise as a flat rate taxpayer can reclaim their input tax on their first VAT return anyway.

(see here under Box 4) - http://www.hmrc.gov.uk/vat/managing/returns-accounts/fat-rate-returns.htm#5

Rules are you can reclaim for goods and assets, still on hand at time of registration retrospecively 4 years (ie, if you bought a van or laptop last year and still have the VAT invoice and still have the van/laptop you can reclaim the VAT on first VAT return).

For services, you can only go back 6 months from date of registration and does not involve anything that has been consumed such as fuel in a van, etc...but you can have legal and accountancy fees and similar.

Trust that all makes sense, your first return should be a reclaim (money coming back to you).

Do you need help with the trade sector or is that fairly obvious/clear?

buddy143

thanks very much Jason and Lordbase.
I feel better now. Hopefully I should get approval in the next couple of wks.:A