Do I include VAT in Turnover when applying for Bounce Back Loan

moatfarm

Hi, I’m filling in the bounce back loan application and I’ve worked out 25% of my annual 2019 turnover but I don’t know whether I have to deduct the VAT from that figure? When I’ve tried to research myself I’ve come across conflicting answers. Any help would be great, thanks. 

Grumpy_chap

No.  VAT is not turnover.

moatfarm

I’ve just rang the bank and they said it includes all taxes including VAT... more confused now. 

Grumpy_chap

No need to be confused.  VAT is not turnover.
When you prepare your corporation tax return, what does the turnover figure include in the accounts?  No VAT.

Think about it logically, VAT is just an amount you add to the invoice and collect and pass on to the Government.  So, the BBLS does not need to fund VAT that has not been added to invoices for work not done.

However, if you got all the details of who you spoke to in the bank on the call centre out-of-hours, trusting them to be an expert in BBLS, then go with that.  
Might as well rely on a random "somebody" in the bank's call-centre who gave you a favourable answer as much as you can rely on a random "somebody" on a forum who gave you an unfavourable answer.

Best thing, to be sure, is to ask your Accountant.

Jeremy535897

You must be VAT registered, or you wouldn't be charging VAT. What Grumpy says is usually, but not always, correct. For example, if you operate a VAT flat rate scheme, the VAT you charge in excess of the flat rate is included in turnover.

Grumpy_chap

To assist the OP if they are using VAT Flat Rate Scheme, the turnover calculation is like this:

• Turnover for the year (excluding VAT), say £100k
• Add VAT invoiced, so £20k
• Deduct VAT paid to HMRC (4 x quarterly VAT-bills), for example low cost trader at 16.5%, VAT paid £19.8k
• Turnover = £100k + £20k - £19.8k = £100.2k

The £0.2k is the flat rate scheme equivalent of input VAT.
Still back to VAT is not turnover.

moatfarm

Thanks. I thought VAT would be excluded also however I asked the person at the bank to double check she said it was definitely included. 

Yes I am VAT registered. I don’t pay corporation tax as I’m a sole trader. I use the global accounting margin scheme so I work out the VAT which is charged on the margin. Under this scheme I can’t claim back VAT. 

I got the details of the person at the bank and will ring again tomorrow to see if the story changes. 

Thrugelmir

moatfarm said:

I got the details of the person at the bank and will ring again tomorrow to see if the story changes. 

Unlikely that the bank official is going to have any expertise with regards to VAT. 

Jeremy535897

Grumpy_chap said:

To assist the OP if they are using VAT Flat Rate Scheme, the turnover calculation is like this:

• Turnover for the year (excluding VAT), say £100k
• Add VAT invoiced, so £20k
• Deduct VAT paid to HMRC (4 x quarterly VAT-bills), for example low cost trader at 16.5%, VAT paid £19.8k
• Turnover = £100k + £20k - £19.8k = £100.2k

The £0.2k is the flat rate scheme equivalent of input VAT.
Still back to VAT is not turnover.

But part of it is (0.2k in your example, although I'm not sure why it is so low). However, the margin scheme works differently, in that the VAT charged by the trader is paid to HMRC, and therefore would not form part of turnover.