flat rate vat for consultancy

[Paul2012]

Could anyone give an example how 14.5% flat rate care scheme, would work for consultancy, as i thought vat couldn't be charged on consultancy or contract work

Many thanks
Paul

 

[Paul_Rosser]

I'm on the flat rate and we offer consultancy to our clients. Our rate is 14%, but you get a 1% discount in the first year.

The way it works is say we do some work for a client for £1000, we invoice them £1200 (£1000+VAT), so we get £200 in as VAT.

If that was the only invoice raised for the VAT period we would then give the HMRC £156 (£1200 @ 13%) and keep £44 as additional profit.

 

[Paul2012]

Thanks Paul thats along the lines of what I was thinking?

I got confused because an accountant I saw today said I can't charge vat for my time :s unless I got the wrong end of the stick

Are you able to claim vat back on purchases at 20% (if charged at 20%)?

Many thanks
Paul

 

[Paul_Rosser]

Haven't heard of that before, unless your contract with a customer excludes you from charging VAT to them.

On the flat rate scheme you can only claim back VAT for some capital purchases of over £2000, thats not to say each item has to cost £2000, but the invoice total has to be £2000 (including VAT).

More info here - http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#8

 

[elaine@cheapaccounting]

Thanks Paul thats along the lines of what I was thinking?

I got confused because an accountant I saw today said I can't charge vat for my time :s unless I got the wrong end of the stick

Are you able to claim vat back on purchases at 20% (if charged at 20%)?

Many thanks
Paul

Are you vat registered?

Here is some info on how the vat flat rate scheme works ....

http://www.cheapaccounting.co.uk/blog/index.php/would-you-be-better-off-on-the-vat-flat-rate-scheme/

 

[Jeremiah@RHJ Accountants]

Thanks Paul thats along the lines of what I was thinking?

I got confused because an accountant I saw today said I can't charge vat for my time :s unless I got the wrong end of the stick

Are you able to claim vat back on purchases at 20% (if charged at 20%)?

Many thanks
Paul

As has been explained you can charge VAT at 20% if VAT registered and pay over 14.5% (1% discount in first year of registration) to HMRC.

However what is you place of supply?

For example i have many contractor clients who are IT consultants who work out of UK LTD and invoice to a Irish agency.

So this would mean there place of supply would be Ireland and they don't charge VAT on their sales invoices.

Is this what your accountant means?

I would go back and ask him or her to explain and is your accountant a contractor accountant?

Jeremiah Jordan
Smith Craven Chartered Accountants

 

[Paul_Rosser]

Are you vat registered?

Here is some info on how the vat flat rate scheme works ....

http://www.cheapaccounting.co.uk/blog/index.php/would-you-be-better-off-on-the-vat-flat-rate-scheme/

Very good guide, thanks Elaine.