Quick basic question on VAT

[James1556]

I just want to 100% make sure I understand this properly, if our company:

£100k revenue
£40k expenses

And assume a VAT rate of 20% and a corporate tax rate of 21%:

Our VAT bill would be £20,000
Our profit would then be £40,000 (£100k - £40k - £20k)
We are then corporation taxed 21% of the £40k profit

Is this correct in a nutshell assuming all the revenue is VATable?

 

[David Griffiths]

I just want to 100% make sure I understand this properly, if our company:

£100k revenue
£40k expenses

And assume a VAT rate of 20% and a corporate tax rate of 21%:

Our VAT bill would be £20,000
Our profit would then be £40,000 (£100k - £40k - £20k)
We are then corporation taxed 21% of the £40k profit

Is this correct in a nutshell assuming all the revenue is VATable?

No.

1) if your Revenue figure of £100k is gross including VAT, the actual VAT will be £16,667.

2) is there no VAT recoverable on your expenses?

If there isn't then the profit would be £43,333

On the other hand, if your sales are £100k plus VAT = £120k, your VAT liability (again assuming not VATable inputs) is £20k, but your profit is £60K


3 Corporation tax is 20%

But you don't say if expenses include any salaries for directors, which might reduce the profit and tax at no tax cost to the directors

 

[James1556]

Ah ok, my mistake, makes sense thanks! I'm just trying to keep the example simple so you can assume that we do not claim any VAT back on expenses. Thanks for the help, I understand that better now.

 

[SBlundell]

so you can assume that we do not claim any VAT back on expenses.

If there's no VAT on expenses almost invariably you'd be best on a flat rate VAT scheme. I know it wasn't your question but still.....