Accounting Software? - Construction CIS? VAT?

00ec25

Gareth83 wrote: »

Gross profit = 6000 - 2000 - 1500 - 570 = £1930

Thoughts?
Yes, once more you show you have failed to understand the mechanics of how taxable profit is calculated

ask your accountant to explain the flat rate surplus calculation and how that is recorded in the profit and loss account

i grant you however that, on the examples to date, being Vat registered is more cost effective than not being vat registered. That is a no brainer for a business model based on buying physical "stuff" and converting that into saleable "things" for customers who are themselves vat registered and so are immune to the price increase.

It also appears you have low risk of being treated as a limited cost trader if you flat rate

Options?
several...
- pay your accountant to teach you
- attend a course ?
https://www.cipp.org.uk/course/construction-industry-scheme.html
https://www.gov.uk/guidance/help-and-support-for-vat
- focus on delivering the business and leave (ie pay) those qualified and experienced in the admin / accountancy to do that aspect for you.

After all, your background shows repeated failure to understand what your bookkeepers did for you in the past, and that is a clear example of a key facet of a successful business person, ie. knowing where their strengths and weakness lie.

Gareth83

Admittedly I was wrong in my initial calculation but now it's making sense as I've been working my way through the examples and having been corrected and pointed in the right direction.

My inclination was right and putting it pen to paper has been proving it.

So for gross income then I'll revise as follows:

Flat rate scheme of current rate of 9.5% could be even better and simpler!

Job value = 5000 net
Labour = 2000
Materials = 1250 net

Vat calculation = 6000 * 9.5% = £570

Gross profit = 5000 - 2000 - 1250 - 570 = £1180

Thoughts on that? As this is now worse off than being non-VAT registered. I thought as I'm not claiming VAT back on materials and I've received the full VAT value on my sales my gross profit above of £1930 is the right figure for comparison purposes?

I thought I was right.... And I haven't talked about taxable profit only gross profit on that one job...

So what have I got wrong with my calculation now?

00ec25

Gareth83 wrote: »

So what have I got wrong with my calculation now?

you have missed out the flat rate surplus calculation.
That is precisely the point of being on the flat rate scheme in the first place since that is the be all and end all of the profit margin for a flat rate business

Gareth83

Adding in FRS calculation

Job value = 5000 net
Labour = 2000
Materials = 1250 net

Vat calculation = 6000 * 9.5% = £570
FRS Calculation = 1000 - 570 = £430

Gross profit = 5000 - 2000 - 1250 - 570 + £430 = £1610

So £110 better offer than being non-VAT registered?

I think that finally got me there?

And for Example 2

Job value £400 net Inclusive of 10% allowable uplift
Material cost £363.64 net (400/1.1)
VAT calculation = £480 x 9.5% = £45.60
FRS Calc = 80 - 45.60 = £34.40
New profit = 400 - 363.64 - 45.60 + 34.4 = £25.16

Anything else needed or calcs okay now?

As FRS in example 1 is £430 > £250 then flat rate better
As FRS in example 2 is £34.40 < £72.73 then 20% VAT would be better?

As example 2 is rare as that was just looking at one line material in isolation then for me I think I've deduced flat rate is better for my business model.

I've also worked out that if material supply costs are 43% or more of the total job value then worth sticking on standard rate. As my business is primarily adding value it would be rare material costs. Any thoughts on that figure?

phill99

Gareth83 wrote: »

What do you mean it's never mine? The money goes in my bank from my customer, and I've already spent out on my suppliers. The difference is then owed to the vat man yes? So yeah I'm just collecting it that's fine with me...

But as you say for profit I should base it on net then...

Job value £5000
Labour £2000
Materials £1250
Gross profit = 5000 - 2000 - 1250 = £1750

So back to the £1750 again ie. £250 better off than the £1500 of being not vat registered?
I still owe £750 VAT but that's just collected and set aside so not used for profit calculations but still yields same answer?

In my second example of just a material job:

One item in isolation, I can be allocated the job value for materials at say £400 net

Job value £400 including allowable uplift on net value of materials of 10%
Material cost £436.37 = (400/1.1) * 1.2
Profit/Loss = loss of £36.37

But if vat registered

Job value £400
Material cost £363.46
VAT bill = £80 - £72.73 = £7.27
New profit = 400 - 363.46 = £36.54

So again I'm better off by being vat registered also from making a £36 loss to £36 profit so £72 better off....

If this is incorrect please show me a calculation or a link how to calculate it or which bit of wrong?

You are double counting the vat. That is why you are showing a higher profit. You seriously do not have a clue as to what you are doing.

Gareth83

I've moved on since that calculation... See my latest post

00ec25

Gareth83 wrote: »

Gross profit = 5000 - 2000 - 1250 - 570 + £430 = £1610

wrong
what do you do under the standard VAT scheme that you do not do under the flat rate scheme?


I am not going to spoon feed you each answer since you expect us to train you bit by bit, so go off and do your next bit of learning


https://www.gov.uk/vat-flat-rate-scheme

BoGoF

"I'm not out my depth" - we believe you......

Gareth83

00ec25 wrote: »

wrong
what do you do under the standard VAT scheme that you do not do under the flat rate scheme?


I am not going to spoon feed you each answer since you expect us to train you bit by bit, so go off and do your next bit of learning


https://www.gov.uk/vat-flat-rate-scheme

Well I've just been on the website to check and I cannot find anything that goes against what I have put? However having been to see the accountant this morning he has said the flat rate is much better for myself.

But why can't you explain what is wrong with the £1250 used for materials? Or should I now be using gross figures?

I'm assuming you mean you should use gross figures but then that should be the same for job value also? So £6000 - £2000 - £1500 - £570 + £430 = £2360

Now I'm even better off again than being non-VAT registered?

Just a simple calculation or formula would be good so I can work through it...

Alice_Holt

00ec25 wrote: »

Thoughts?
Yes, once more you show you have failed to understand the mechanics of how taxable profit is calculated...

ask your accountant to explain the flat rate surplus calculation and how that is recorded in the profit and loss account ...

- focus on delivering the business and leave (ie pay) those qualified and experienced in the admin / accountancy to do that aspect for you. ..

I have to say you have been very patient with the OP, but I get the impression he is incapable (by himself) of understanding the accounting aspects of his business (even after all the help and links you have provided).

He has demonstrated (time and time again) why he needs to pay for the services of someone who knows what they are doing.