Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


Vat flat rate scheme

Hi, I'm studying at level 2 at present but myself and my husband also run our own limited company that is VAT registered. We are on the flat rate scheme at 9% with the first year 1% relief.

Now I thought I had the concept of how to work the VAT liability out, however our accounts software is showing a different amount to what I worked it out to be and am now totally confused.

I know our accountant will be taking care of this for us, however I am really finicky about knowing where figures etc have come from and how they have been worked out!

So......

On a turnover Including VAT of £140,732.41 the vat charged would be £28,146.48 at 20%. Giving me a turnover Exc Vat of £112,585.93. Am I correct?

If so then the 9% would give me a liability of £12,665.91 meaning we would retain and make a profit of £15,480.57 ??

So why is my Accounts Software (Kashflow) Showing a turnover inc VAT of £140,732.41, turnover exc VAT of
£117,277.28. The VAT charged of £23,455.13 and a VAT liability of £12,665.92 with us retaining £10,789.21 ??

In both of these the total does equate to £140,732.41. What I don't understand is why the software is saying the VAT charged is £23,455.13 not £28,146.48 like I calculated?
It also seems that we're not making as much on the retained VAT as I calculated and I'm driving myself mad trying to figure out what is right and what isn't!

Can anyone decipher this for me as it's driving me mad trying to figure out why!!

Comments

  • KernowAccountantKernowAccountant Settling In Nicely Registered Posts: 120
    edited October 2015
    On gross turnover of £140,732.41 (assuming all standard rated sales) the input VAT charged would be 1/6th: £23,455.40. It is not 20% of the gross as you have done; VAT is charged on the net sales value.

    Flat rate VAT at 9% would then be £12,665.92.

    Your 'profit' calculation is flawed as it is ignoring the input VAT which would be recoverable if it were not for the use of the FRS.

    I assume that the quoted figures are annual, otherwise you could easily breach the scheme threshold if they are for a quarter (for example).

    In summary, your software is correct.
  • taralou89taralou89 Registered Posts: 3
    Thanks for replies, this is all new to me which is why I was looking for help. I managed to work that out by doing some calculations just! however completely forgot how I did it so thank you Kernow accountant. Very helpful.
    In response to the figures, these are for our first quarter!! However it wasn't expected to be this high, and in a few weeks time the income will drastically drop again, so hopefully we will be able to stay under the £230,000 threshold!
  • taralou89taralou89 Registered Posts: 3
    Thanks mrme89 that's great
Sign In or Register to comment.