FRS VAT

VickyRoss1305

Hi all I was hoping for some feedback on the new rules from April 17 regarding the flat rates schemes. When they say that your expenses have to be a certain % of your turnover where do labour intensive companies sit? We don't have purchases that are sold on so can we include our overheads in the calculation ?

VickyRoss1305

Not entirely mrme truth be told every time I found a write up on it it said to be confirmed or it implied that further statements would be published maybe I am not looking in the right place?

VickyRoss1305

Thank you mrme

Gingeraccounts

Looking at the information in the link mrme89 refers to, the information contained therein is extremely vague and does not help me with the assessment of the clients I currently have on the FRS.
It refers to goods, which would usually mean cost of sales, however then goes on to mention food & drink consumed by the business and vehicles, vehicle parts & fuel.
Does HMRC then mean all expenses except these?
Any views on this important and imminent change welcome.

MarieNoelle

Here is the draft legislation

Amendment of the Value Added Tax Regulations 1995
2. Part 7A of the Value Added Tax Regulations 1995(b) (flat-rate scheme for small businesses)
is amended as follows.
3. After paragraph (3) of regulation 55A insert—
“(4) For the purposes of this Part, “limited-cost trader” is a flat-rate trader whose
expenditure on relevant goods in any prescribed accounting period, together with any VAT
chargeable on that expenditure, is less than the specified amount, where—
(a) “relevant goods” are goods used or to be used by a flat-rate trader exclusively for
the purposes of the trader’s business but excluding the following—
(i) vehicles, vehicle parts and fuel except where the category of business
applicable to the flat-rate trader in the Table is “Transport or storage,
including couriers, freight, removals and taxis” and the flat-rate trader owns a
vehicle for business use or holds a vehicle for business use under a lease;
(ii) any food or beverages for consumption by the flat-rate trader or employees of
the flat-rate trader;
(iii) capital expenditure goods

MarieNoelle

There is a very good article in Tax Adviser Magazine on this. Goods include gas and electricity, but if there is any private use it is excluded completely. Services like rent, telephone, broadband are also excluded.
For most contractors therefore the relevant costs will be limited to stationery and small equipment (not capital items).

Gingeraccounts

That's helpful thank you Marie Noelle. Do you know if Mileage, accountancy fees, travel and accommodation are also excluded - I have some writer/journalist clients on FRS and these items make up the majority of their expenses so i think they are looking likely to come under the new rules.

MarieNoelle

They would be classed as services won't they?

MarieNoelle

mrme89 said:

Read the above...



Mileage ... vehicle costs only ok if it falls into the category of business (taxis etc)



Accountancy fees would be a s OU v ENIR.?????_



...

BeccaLouJ9

S L O V E N L Y

MarieNoelle

you should have said there was a prize to win. I would have put more effort into it.

LouiseSTB

Hi, on the topic of these changes, I have read the legislation and have taken from it that every quarter we have to decide if the 16.5% rate or the client's normal FRS rate applies, however my colleague isn't sure if the test has to be done every quarter.
Interested to see how other people have interpreted the wording?

MarieNoelle

As I understand it the test can be performed every VAT quarter.

MarieNoelle

The latest updated guidance from HMRC can be found here (para 4.4)
https://gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses/vat-notice-733-flat-rate-scheme-for-small-businesses#para4-4

Gem7321

If you report VAT quarterly the test must be done quarterly, or if you report annually you test annually

Enterprise_Warrior

Is the general consensus on this to have contractors deregister by 31/03/17?

MarieNoelle

Enterprise_Warrior said:

Is the general consensus on this to have contractors deregister by 31/03/17?

At the end of the day it is their decision. Some may be borderline so consider annual accounting rather than perform a quarterly test.
Some will be over the threshold anyway but may want to stay on FRS for its simplicity.


But yes most will probably be better off deregistering or switch to standard VAT.