According to Economia research, 36% of the UK's smallest businesses are unaware of the rules governing VAT thresholds.
"A third of the UK's smallest businesses are unaware of the rules governing VAT thresholds, recent research has revealed.
This lack of understanding could mean that approximately 780,000 businesses are at risk of being fined by HMRC.
Meanwhile, according to the research, 9%% of small businesses intentionally limit their trading in order to avoid reaching the VAT threshold. Additionally, 27% of those businesses limiting sales temporarily ceased trading to stay under that threshold.
Under the current rules, where a taxable person (for example an individual, company or partnership) has VAT taxable turnover of more than the current registration threshold of £82,000 in a rolling 12 month period or where turnover is expected to exceed the registration threshold in the next 30 day period then they must register for VAT.
It is important to monitor turnover, as there is a penalty for late registration in addition to the tax payable."
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Very timely debate i will be going over the vat threshold this month and am not looking forward to it (based on a 12 month rolling period)
I'm currently looking at the flat rate which i believe is 12% for our industry
The way my accountant explains how it is calculated is slightly odd and you end up paying more than 12%?
I will try and explain
We will assume that the bill ex vat is £100 to keep it simple
If you charge a customer £100 Then vat at 20% is £20 Total bill to customer £120 easy peasy
Using the flat rate scheme (12%) I'm told the 12% is calculated by £100 plus 20%(Normal rate of vat) = £120 x 12% =£14.40 . Bill to customer £100 +£14.4 = £114.4
Has any body used this scheme and do you know if this is correct?
Any other tips gratefully received to ease the panic!
Thanks
Ross
You Charge 20% VAT which the clients pay. For your VAT return you have to pay 12% (during first year) of the gross amount. So £100 + VAT = £120 (Client pays you).. You therefore owe the VAT man £14.40.
Thank you both!
My plan was to charge my private clients the 12% only or 14.4% as it actually is . Can i put VAT at 14.4 on the invoice?
Or do i have to find another way ?
Bottom line NO. You could however reduce your net price and then charge the 20% VAT to get the same result for the client. This way it isn't too much of a shock to them but to be honest just bite the bullet and charge the full rate, if some moan a lot then plan b.