gimbals started this topic @ 07:55 on 05/08/2004
Hi all, I am about to register for VAT as my turnover is creeping above the threshold and am unsure on which scheme I should use for reclaiming VAT. It seems that I can opt for the simple scheme of giving C&E a flat 11% on all VAT sales and keep the difference (6.5%) or I can give them the full 17.5% and reclaim 17.5% on all purchases. The simple scheme looks attractive in terms of reduced paper work but does anyone know if it is financially worthwhile?
Many thanks
Michael
RE: Reclaiming VAT question
Barr | 05/08/2004 09:29 AM
Can't really comment on this as you are the only one who knows your level of VATable expenditure and income.
You need to look into the amount of VAT you will be likely to be able to reclaim in any quarter in the future to work out if you will be better off. (use your budget/business plan).
The scheme rate of 11% is based on Gross sales, to be equivalent to the 17.5% (based on net sales) VAT rate the rate is actually 12.9% (not 11%).
So be careful when working out if it is better or worse for you.
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Barr Stevenson
Chartered Accountant
http:/www.jsaccountants.co.uk
RE: Reclaiming VAT question
James Smith | 05/08/2004 09:34 AM
Michael,
Its really a maths question.
Sit down with your calculator (or your accountant) and work out under which scheme you will get the most rebate. You also need to be careful looking at that 11%, the method of calculation isn’t all that meets the eye as the rate is worth 12.9% not 11%. (Have a look at the VAT leaflets about grossing up fi you dont have an accountant)
The take up for the fixed rate schemes is low, and its low for a good reason - the rates are generally poor.
In normal circumstances it is worth being on the "normal" scheme when you first register as you may be able to reclaim some VAT from the start-up phase when there is often lots of cost, eg your PC etc.
I hope this is of some help,
Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Reclaiming VAT question
gimbals | 05/08/2004 01:18 PM
Thanks guys - good answers. I will stick to the "nornal" method for now!
