VAT Flat Rate scheme + CIS Deductions

Sandy Dog
Sandy Dog MAAT, AAT Licensed Accountant Posts: 25 Dedicated contributor ? ? ?
Hello

I placed this thread in the wrong forum yesterday. Some of you may have seen it so I apologise for its duplication.

Please will someone let me know whether the calculations below are correct or not? My main concern is whether the P&L account should show the VAT Flat rate element or simply the Net Sales less VAT Flat Rate element.

An electrician whose VAT flat rate is 9.5% carries out work for a main contractor.

INVOICE
Labour incl Emp’s NIC 60.00
Materials incl VAT 30.00
Mark-up 10.00
Value of Work 100.00
VAT @ 20% 20.00
Value of Work + VAT 120.00
CIS Deduction - Labour 60.00 x 20% (12.00)
Payment Due from Main Contractor 108.00


VAT Flat Rate Liability
Sales (incl VAT) 120.00
VAT Flat Rate 9.5%
VAT Liability 11.40


VAT Charged to Client 20.00
VAT liability (11.40)
“Profit” on VAT 8.60


Profit and Loss account
Sales incl VAT 120.00
VAT Flat Rate element (11.40)
Sales less VAT Flat Rate element 108.60
Cost of Sales – Lab 60.00 + Mat 30.00 (90.00)
Gross Profit 18.60
Expenses (0.00)
Net Profit (for Income Tax) 18.60

Simplistic Income Tax Calculation
Net Profit 18.60 x 20% 3.72
Rebate for CIS deduction (20.00)
Income tax refund due (16.28)

Comments

  • groundy
    groundy Registered Posts: 495
    Looks good to me
  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    Me too!
  • Gem7321
    Gem7321 MAAT, AAT Licensed Accountant Posts: 1,438
    We normally show turnover in the accounts as gross then flat rate vat as an expense
  • JodieR
    JodieR Registered Posts: 1,002
    my head's a bit fuzzy so excuse me if i've got the wrong end of the stick here, but why, on your second last line have you got rebate for CIS as £20 when only £12 was deducted?
  • JodieR
    JodieR Registered Posts: 1,002
    Sandy Dog wrote: »
    Hello

    My main concern is whether the P&L account should show the VAT Flat rate element or simply the Net Sales less VAT Flat Rate element.

    You can show it either way in the accounts, both are acceptable. I've phoned HMRC about this before and that's what I was told.
  • Sandy Dog
    Sandy Dog MAAT, AAT Licensed Accountant Posts: 25 Dedicated contributor ? ? ?
    Thanks for the extra tip as well.
  • Sandy Dog
    Sandy Dog MAAT, AAT Licensed Accountant Posts: 25 Dedicated contributor ? ? ?
    Well spotted and no it wasn't a deliberate mistake, the £20 should as you say have been £12
  • Sandy Dog
    Sandy Dog MAAT, AAT Licensed Accountant Posts: 25 Dedicated contributor ? ? ?
    If HMRC are happy then I'm happy. I think I prefer to take it off teh sales rather than as an expense.
  • groundy
    groundy Registered Posts: 495
    Nice spot JodieR, left me feeling stupid on a monday morning:thumbup1:
  • stevo5678
    stevo5678 Registered Posts: 325
    Sandy Dog wrote: »
    If HMRC are happy then I'm happy. I think I prefer to take it off teh sales rather than as an expense.

    HMRC's preferred presentation is to net off with sales. I think showing as an expense is odd as it is a FR saving.

    If we don't net it off with sales then we would show sales net of standard rate vat then the FR saving on a seperate line (as income as it is a saving).
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