Flat Rate VAT (FRV)

[mr.blister]

1. Hi, I have just become VAT registered on the FRV of 9.5%, I assume for the first year I receive a 1 % discount so therefore it's 8.5%, or do I deduct 9.5% and apply for a rebate of 1%?

2. Now here's my conundrum, or so it seems, I can't simply add 20% to an item price and deduct it the same way, as I get different answers. Therefore I have found that I can (and forgive me if I am wrong) I can use 1.2 (x to add or / to deduct 20%) the item price to add or deduct the 20%, and the results work out exact, or should it be 20% to add and to deduct 20% use / 1.2?

Yet when I see FRV excel templates online or VAT calculators online they don't use or assume the decimal equivalent I'm using;

1.2* (to add 20%) or / (to deduct 20%), they're worked out online as 20/100*item price (or as item price+20%).

So which way does HMRC accept, as 8.5% is 1.085, or simply 8.5/100*item price, (and yet in no way is it the same result in reverse).

I am pretty good with numbers but damn.... am I really that confused or simply can't see the trees for the woods (wowski).

Advice much appreciated.

 

[Hash and Bash]

Not entirely sure what you are trying to calculate but if you are trying to calculate a price excluding vat from a vat inclusive price the percentage deduction should be (20/120)*100 = 16.667%



e.g. for an item selling for a vat inclusive price of £120
deduct 16.667% or £120 = £20
which gives a vat exclusive price of £100.

If you are trying to deduct for 8.5% then the percentage deduction would be(8.5/108.5)*100 = 7.8341%

 

[mr.blister]

which if I am right you are on the lines of what I was trying to say but looking at it in a different way, so to speak.

so for example; 8.5% (using 7.8341%) of £35886.05 = £2811.34 which I calculated from 35886.05*1.085, also using your calculation (8.5/108.5)*35886.05= £2811.34

my point was to ask is this the correct way to calculate VAT (when adding/deducting) and is it the same way HMRC calculate it, simply as online and in many online excel sheets (that claim to calculate such for you) they use calculations that don't correlate when you add or subtract VAT, simply as the resultant figure is off by a margin, so I queried, what we just did above, be the norm formula to use.

 

[Hash and Bash]

I believe the way the flat rate scheme works is as follows:

Net amount you invoice = £100
Vat charged to customer (20%) = £20
Gross amount = £120

Flat rate vat (8.5% of Gross amount £120) paid to HMRC = £10.20
Vat received from customer =£20
Difference £20- £10.20 = £9.80 is the money you trouser!

 

[David Griffiths]

Difference £20- £10.20 = £9.80 is the money you trouser!

Having given up the right to recover input VAT on the goods that you sell, and your VATable overheads. So it's not exactly pure profit

 

[mr.blister]

I believe the way the flat rate scheme works is as follows:

Net amount you invoice = £100
Vat charged to customer (20%) = £20
Gross amount = £120

Flat rate vat (8.5% of Gross amount £120) paid to HMRC = £10.20
Vat received from customer =£20
Difference £20- £10.20 = £9.80 is the money you trouser!

Yeah I have seen this and that is why I was unsure which formula/method to use, as I would expect to use 8.5/108.5*item price, though it seems it's straight as you described above, that's a damn shame given I'd expect to pocket the larger portion of the VAT back from client than the other way around as it seems.