RE: Flat rate scheme VAT

reader

Hi,

Is anyone taking clients off the flat rate scheme for VAT because the 16.5% limited company trader category makes it is no longer worth it?

CSan89

We have taken quite a few clients off

MarieNoelle

Yes and No.
Some were on 14% anyway and would never have qualified to stay due to their turnover.
I have one client (11%) who is mostly ok to remain on the lower rate but I have to calculate every quarter whether they qualify (and advise whether they need to go and buy more cartridges/printing paper before the end of the quarter!). I thought about moving them on the annual VAT scheme but it doesn't take that much effort to do the calculations every quarter.

reader

It's a shame we can't charge for this type of advice as the gain switching the client over is so small.

KoopaCooper

We only have a few clients on flat-rate (anything from 6.5% up to I think 12.5%) but their purchases are all sufficient to retain their percentage rather than be shunted onto the 16.5% limited cost rate. There is one that I particularly have to check each quarter (and then ask for her business utility bills to push her over the threshold).

There is one other client who's recently arranged to buy his goods in bulk in the UK and then sell them in the USA (where profit margin is higher for him, I imagine) - as long as he does so through the same company of course (he also has a US-incorporated business), in which case he'll have a large amount of purchases and all zero-rated sales, so I'll be taking him out of flat-rate for sure.

MarieNoelle

@KoopaCooper I seem to remember that although gas and electricity are classed as goods for the purpose of FRS limited cost trader if there is any private use it is disallowed altogether. Something to watch out for when client uses their home as office.

reader

Yup, gas and electric has to be exclusively for business to count: https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses/vat-notice-733-flat-rate-scheme-for-small-businesses

KoopaCooper

I do remember that one, yes.

They did previously use their home as office, but were able to claim their phone bills to tip over the threshold (as they had a separate line for business use only), but have recently rented a space outside of the home specifically for office use, so it's more clear-cut now.