SSAP 5 and self assessment

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
HMRC allow an unincorporated business to declare their turnover and expenses gross of VAT when submitting their self assessment return. This conflicts with SSAP 5 which states that turnover and expenses should be stated net of VAT reflecting the taxpayers role as a tax collector. I was taught (in pre self assessment days) that it was best practice to follow SSAP 5 even when dealing with an unincorporated business. None of the accountants I know (which aren't many) submit gross figures but I wonder what wider opinion is. It would certainly save a massive amount of time to submit gross figures especially when faced with a Simplex VAT book or other unanalysed VAT record but is it still regarded as not the right way to do it? :)

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment

    forgive me if I have misunderstood your post but are you not referring to those individuals who are not VAT registered in which case you have to declare the expenses including VAT as they can't recover it. Similarly, they wouldn't charge VAT on their income.

    If an unincorp. business is VAT registered then you would prepare an income/expense account net of VAT.

    Regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment

    Whether a incorporated business or not, if you are VAT registered your figures should be reported NET.

    If you are NOT VAT registered then your figures are reported GROSS.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment

    Hi Thanks for your comments both. I should perhaps have made the reason and source of my question more clear. It stems from guidance printed on page SEN4 of HMRC publication SA103 Notes for the self employed.

    The relevant paragrah is reproduced below:-

    "If you are registered for VAT and are not within the Flat Rate
    Scheme (see page SEN6), you may enter details of your business
    income and allowable expenses either:
    • all net of VAT (that is, with the VAT figure taken off), or
    • all still including the VAT figure.

    Where you choose the second method, either:
    • include your net VAT payment to us as an expense in box 3.63,
    or
    • include any net repayment you receive from us as a taxable
    receipt in box 3.50. Tick either box 3.27 or box 3.28 to show
    whether entries in boxes 3.29 to 3.64 include or exclude VAT."

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment

    Yes I know what you mean. The above posts are still relevant it relates to whether you are VAT registered or not.

    Regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment

    G Ruck is correct.

    You do have the option of submitting figures inclusive of VAT, even if you are VAT registered - as clearly stated in the guidance notes.

    However, I do not see how it is easier to prepare accounts in that fashion even if, god forbid, you are using a Simplex D book.

    You still have to do all the analysis to complete the VAT returns each quarter so there is very little, if any, extra work netting the input VAT against the relevant expense account.

    The only time you wouldn't do this is when using the Flat Rate Scheme but there are seperate rules for the treatment of VAT in that case.

    I have never known any accountant to report figures inclusive of VAT but I suspect there are a number of individuals completing their own tax returns that do so. I wouldn't bet my house on their adjustments being correct though!

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment
    deanshepherd wrote:

    However, I do not see how it is easier to prepare accounts in that fashion even if, god forbid, you are using a Simplex D book.

    Most of our clients use Simplex D books - I don't think many of them have ever heard of excel!!!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment

    Ihave worked in Practice for a long time now and have never come across a VAT registered trader reporting income/expenses inclusive of VAT. As a firm, we would never ever ever ever ever report figures gross on a tax return if the trader was VAT registered. Not only that, our systems simply would not allow us to. As for the flat rate scheme, this is, as mentioned above, treated differently due to the VAT treatment.

    When I have prepared manual tax returns, I have reported gross when the trader (like my brother) is not VAT registered but that is the only exception.

    I would imagine that reporting gross when you are VAT registered would just create a whole load of unnecessary work to make sure the tax liability/refund ultimately ends up correct - so why would you bother?



  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment
    bluewednesday wrote:
    Most of our clients use Simplex D books - I don't think many of them have ever heard of excel!!!


    Oh dear! I still get a headache just thinking about summarising those books in excel.

    I'm assuming your clients probably follow all the figures through to the annual summaries at the end?!

    :wink:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:SSAP 5 and self assessment

    I wish!! :lol:

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