VAT Schemes for smaller businesses Flashcards
How much taxable turnover can a business have to be part of the Flat Rate scheme?
£150,000 or less
A business must leave the flat rate scheme when?
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.
How often do businesses on the Flat rate scheme complete a VAT return.
Quarterly as normal.
Can businesses reclaim VAT on purchases if in the flat rate scheme?
No
What is the minimum amount is the Capital Asset purchase you can reclaim on the Flat Rate scheme?
£2,000
What is the special deal on the first year of the Flat Rate scheme?
1% reduction in the flat rate applied in the first year.
The flat rate turnover includes?
All turnover, including zero rated, exempt sales and VAT on any sale. The Gross amount.
Who issues the percentage in the Flat rate scheme?
HMRC
What is a “limited cost business?”
Businesses where goods cost less than either:
* 2% of its turnover
* £1,000 a year (If its costs are more than 2%)
What is the flat rate of a Limited Cost Business?
16.5%
What are the benefits to using the Flat Rate scheme?
Less administrative burden.
Often end up paying less VAT.
Fewer rules to follow.
First year 1% discount.
What is the Cash Accounting scheme?
VAT is paid or reclaimed only when payment has happened.
What are the advantages of the Cash Accounting Scheme?
Can support cash flow for businesses offering long credit times to customers but has little credit from suppliers.
Automatic relief from irrecoverable debts.
What is business turnover have to be to join the Cash Accounting scheme?
£1.35 or less taxable turnover (excluding capital turnover)
When does a business have to leave the Cash Accounting scheme?
If the taxable turnover exceeds £1,600,000 for 12 months.
Can the Cash Accounting scheme be used in conjunction with the Flat Rate scheme?
No
What is business turnover have to be to join the Annual Accounting scheme?
£1.35 or less taxable turnover
When does a business have to leave the Annual Accounting scheme?
If the taxable turnover exceeds £1,600,000 at the end of the accounting year.
In the Annual Accounting scheme how often do you submit a VAT return?
Once a year.
How does the Annual Accounting scheme work.
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.
When do businesses in the Annual Accounting scheme have to submit their VAT return?
Within 2 months from the end of the year.
When are the payments made in the Annual Accounting scheme?
Month 4 to 12 and the final payment within 2 months of the end of the year.
What are the benefits of the Annual Accounting scheme?
Only one VAT return to submit.
Constant known payments.
Extra month to do the end of year VAT return.
What are the disadvantages of the Annual Accounting scheme?
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.
Which schemes can Annual Accounting scheme in conjunction with?
Both Cash Accounting and Flat rate but not at the same time.
