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Question Title: Flat rate VAT scheme - is it worth me changing ?
| Question: 331 |
| Our property management business is registered for VAT and we are currently required to complete a quarterly VAT return. I have been looking at the details of the new Flat Rate VAT scheme published by the Customs and Excise. I have looked at the rates set by Customs and I am trying to decide whether it would be beneficial for us to join.
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| As you will be aware, the Customs department require that you make a return at the end of each VAT period. The benefit of the new Flat Rate Scheme (FRS) is that you are not required to make numerous VAT calculations for both your inputs (purchases) and outputs (sales or supplies). Under the FRS scheme, you simply calculate the VAT inclusive turnover of your business and multiply this by the flat rate percentage for your trade sector (see tax article on page 19 of this issue of Letting Update). Customs and Excise have, in their wisdom and experience, looked across the different trade sectors and come up with a standard single rate for each sector. In the case of a property management business, Customs have currently set a rate of 11.5% which reflects a business which has a low level of inputs and high value added. In fact, the predominant costs in a letting business will be staff salaries so there will be few input costs that include VAT. The best way to assess whether the flat rate is going to be advantageous to your own particular business is, of course, to consult your accountant and look at previous VAT returns under the traditional method. It must be remembered that costs incurred on behalf of say the maintenance of a client landlord's property (whilst attracting substantial VAT) do not form part of the firm's VAT calculations as these costs should pass directly through the client accounts. In many cases, firms will find that the FRS method will provide a small saving over the older method, especially where there are few VATable purchases. The scheme also allows expensive capital purchases to be treated independently. More attractive perhaps are the indirect savings in bookkeeping and administration costs and, for once, the tax authorities seen keen to help us here.
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References:
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Pages:
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Hyperlinks:
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Letting Update Journal |
Jul 2003 page 19 |
letting-update-journal.html
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Letting Handbook |
Chapter 14 |
letting-handbook-and-factsheets.html
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For more information, discuss on the Forum
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