First self assessment since flat rate VAT.

deejaybee

Hi all,

Joined Flat Rate VAT scheme in August 2013 ( assisted by some excellent advice from folks on here )

Just getting figures together for tax return for 2013-14 Tax Year, and as per thread title, its first one since flat rate vat registered.

I have always used mileage scheme to account for vehicle expenses, 45p for first 10k moles, then 25p thereafter.
Do I still use the same figures now, or have to make any adjustment for VAT ?

Similar question with things like work-wear and stationary etc, do I use amounts on receipts, or have to work out pre-vat price, and use that on tax return ?

I source all my work from one company, and they pay me 20% VAT on invoice, I then submit online VAT return quarterly.

Advice appreciated as always, Thanks !

TheCyclingProgrammer

I'm assuming you're self-employed and you're asking how to calculate your taxable profit for income tax purposes?

As you're on the flat-rate VAT scheme, it means you can't reclaim the VAT on your expenditure. In this case you would use the gross amount (including VAT) when working out your P&L, just as you would if you weren't registered for VAT.

See "Computation of trading profits":
http://www.hmrc.gov.uk/manuals/bimmanual/bim31585.htm

Remember that your flat-rate "surplus" (the difference between the 20% VAT your charge and whatever flat-rate you pay HMRC each quarter) forms part of your turnover.

The same goes for capital assets - use the gross cost for capital allowances purposes. If you purchase a capital asset (or several as part of a single purchase) with a VAT inclusive total of £2000 or more, remember you can still reclaim the VAT. In this case, you use the net cost for capital allowances purposes.

Additional tip: whilst a lot of people think of the "surplus" income derived from being on the flat-rate VAT scheme as "profit" or "free money", this isn't really the case - this surplus is intended to cover your input VAT costs that you would normally be able to reclaim if you were on the standard VAT scheme. This is why the FRS is often promoted as being beneficial to people with low (VATable) overheads as the FRS will often be profitable in this case.

You can calculate your true "profit" from being on the FRS in isolation by calculating your FRS surplus and deducting all of your input VAT that you've been unable to reclaim over the year.

Its always worth keeping an eye on this because if you start incurring a lot of VATable business expenses, the FRS becomes less profitable - it may even result in a loss which would be a good reason to come off the scheme.

deejaybee

Thanks for such a comprehensive reply TCP :T

Yes I am S/E.

Yes, I include the VAT received in my " income" column, and the VAT I pay to HMRC in my "costs" column.


Many thanks again.