VAT Schemes for smaller businesses

Question 1

How much taxable turnover can a business have to be part of the Flat Rate scheme?

Answer 1

£150,000 or less

Question 2

A business must leave the flat rate scheme when?

Answer 2

On the anniversary of joining the scheme their turnover is more than £230,000 (including VAT) or expect it to be in the next 12 months.

Question 3

How often do businesses on the Flat rate scheme complete a VAT return.

Answer 3

Quarterly as normal.

Question 4

Can businesses reclaim VAT on purchases if in the flat rate scheme?

Answer 4

No

Question 5

What is the minimum amount is the Capital Asset purchase you can reclaim on the Flat Rate scheme?

Answer 5

£2,000

Question 6

What is the special deal on the first year of the Flat Rate scheme?

Answer 6

1% reduction in the flat rate applied in the first year.

Question 7

The flat rate turnover includes?

Answer 7

All turnover, including zero rated, exempt sales and VAT on any sale. The Gross amount.

Question 8

Who issues the percentage in the Flat rate scheme?

Answer 8

HMRC

Question 9

What is a “limited cost business?”

Answer 9

Businesses where goods cost less than either:
* 2% of its turnover
* £1,000 a year (If its costs are more than 2%)

Question 10

What is the flat rate of a Limited Cost Business?

Answer 10

16.5%

Question 11

What are the benefits to using the Flat Rate scheme?

Answer 11

Less administrative burden.
Often end up paying less VAT.
Fewer rules to follow.
First year 1% discount.

Question 12

What is the Cash Accounting scheme?

Answer 12

VAT is paid or reclaimed only when payment has happened.

Question 13

What are the advantages of the Cash Accounting Scheme?

Answer 13

Can support cash flow for businesses offering long credit times to customers but has little credit from suppliers.
Automatic relief from irrecoverable debts.

Question 14

What is business turnover have to be to join the Cash Accounting scheme?

Answer 14

£1.35 or less taxable turnover (excluding capital turnover)

Question 15

When does a business have to leave the Cash Accounting scheme?

Answer 15

If the taxable turnover exceeds £1,600,000 for 12 months.

Question 16

Can the Cash Accounting scheme be used in conjunction with the Flat Rate scheme?

Answer 16

No

Question 17

What is business turnover have to be to join the Annual Accounting scheme?

Answer 17

£1.35 or less taxable turnover

Question 18

When does a business have to leave the Annual Accounting scheme?

Answer 18

If the taxable turnover exceeds £1,600,000 at the end of the accounting year.

Question 19

In the Annual Accounting scheme how often do you submit a VAT return?

Answer 19

Once a year.

Question 20

How does the Annual Accounting scheme work.

Answer 20

You make 9 advance payments to HRMC calculated at 10% of your late VAT return. The final payment is made once you have done you VAT return and you pay or reclaim the balance.

Question 21

When do businesses in the Annual Accounting scheme have to submit their VAT return?

Answer 21

Within 2 months from the end of the year.

Question 22

When are the payments made in the Annual Accounting scheme?

Answer 22

Month 4 to 12 and the final payment within 2 months of the end of the year.

Question 23

What are the benefits of the Annual Accounting scheme?

Answer 23

Only one VAT return to submit.
Constant known payments.
Extra month to do the end of year VAT return.

Question 24

What are the disadvantages of the Annual Accounting scheme?

Answer 24

Can only reclaim a refund once a year.
As the payments are based on last years return if sales slow the payments maybe too high.
When the business leaves it will need to adapt is accounting and reporting processes.

Question 25

Which schemes can Annual Accounting scheme in conjunction with?

Answer 25

Both Cash Accounting and Flat rate but not at the same time.