VAT flat scheme for a restaurant

[antoine82]

Hi there,

I'll soon reach the threshold that will make VAT compulsory and my accountant asked me if I wanted to go for the flat scheme. I run a restaurant.

Has anyone been in that situation? Is this scheme a good choice for restaurants?

Thank you for your help!

 

[Paul_Rosser]

The flat rate scheme for resturants is 12.5% and I think you get a 1% discount in the first year.

So say you charged someone £100 + VAT, you would make £20 in VAT and have to pay the HMRC £13.80 (£120 @ 11.5%) keeping £6.20 as additional profit.

With all companies looking at the flate rate scheme it really depends on how much stuff you purchase and have to pay VAT on as you can't claim VAT back under the flat rate scheme unless it's a capital purchase of over £2000 on one invoice.

 

[teddys]

In terms of savings in order for the flat rate scheme to be beneficial you will need to have a look at your input costs:

First year 11.50%

- you will be paying a flat rate of 13.8% of your turnover including VAT and you can't claim back VAT paid on input costs. So on £100 turnover you will be paying a vat of £13.8 (i.e. 120 x 11.5%)

- should you opt for flat rate you will save only if your vatable input costs are below 31% - see below:

Standard vat on £100 - £20
Input vat on £31 - £6.20
Net VAT paid - £13.80

At this point there is not difference between the standard and flat rates. So in order for you to save, your vatable input costs need to be less than 31% of the turnover.


Second year on 12.5%

Going down the same route flat rate will work for you if your vatable input costs are below 25% of the turnover.

Hope this helps you decide.

 

[David Griffiths]

One of the biggest factors is if VAT is charged on rents. We have two virtually identical businesses (takeaways, as it happens). The flat rate works for the one that doesn't pay VAT on rent, doesn't work for the other.

 

[antoine82]

Thank you for your answers!

Last question about the amount that needs to be paid, I have a little doubt.

If I have a turnover of £100 (VAT inclusive), I'll owe £10.4 to HMRC (100-100/1.115)? I am a bit lost because an amount of 13.8 was mentioned earlier...

Is this correct?

Thank you for your help!

 

[kevin.doran]

The flat rate is applied to the VAT inclusive turnover i.e. the gross of £100 in your case, not the net of £83.33.

So the VAT payable would be £11.50 (11.5% of £100), which is 13.8% of the net if you want to look at it like that.