VAT for Amazon Courier Driver

[efeseu]

Hi there, just a quick question.

I'm about to start working for Amazon as a courier driver, and have heard that registering for VAT is a benefit, since I take extra 20% VAT from Amazon and then pay BACK an amount from the VAT to HMRC.

The question is.. How much VAT do I pay them back?

Let's say I'm earning £120 a day, so with VAT it comes to £144.

How would I calculate how much of that VAT would I have to give back?

Is it something like 56% (£13.44) of the VAT goes back to HMRC and the rest 46% (£10.56) I keep for myself? I don't really understand how this works. This is how someone explained it to me.

Or is it 10% (flat rate) of the overall VAT which I've charged that goes back to HMRC?

So let's say after 3 months of 6 days a week, VAT comes to £1728. How much would the VAT return be? Is it 10% of the £1728? Meaning that I have to return £172.80 to HMRC?

I'm really struggling to understand this. Any help would be amazing.

I'm starting next week and it is a pain to see what works out the best. I'm not going to set up a business as Ltd, just normal self employed & VAT registered.

Thank you!

 

[Alan]

I think you are talking about the flat rate scheme which is explained here https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay

Lets say 3 months of 6 days a week comes to £10,000 ex VAT - £12,000 INCLUDING VAT
as a courier your flat rate is 10%
so you pay 10% of 12,000 = £1,200 to pay - less the £2,000 you charged amazon = you keep £800

BUT if your expenses come to less than 2% of turnover ( and your expenses will be fuel in the main ) you get penalise at 16.5%
16.5% of 12,000 = £1,980 you pay back you keep - ugh £20 - not worth the paper work

but if your income is £10,000 ex vat 2% = £200 and that is only 2 tank full ( of a van )- so I don't think you get caught with that one.

 

[Adam93]

You are quite far from the mark. The best thing you can do is arrange a meeting with a local accountant.

Ignoring the flat rate scheme, you pay over ALL the VAT you charge to your customers (Amazon) to HMRC. You reclaim VAT on your business expenses (special rules for motor fuel) from HMRC. Each quarter you offset the two and pay the difference to HMRC.

You are better off as you can reclaim the VAT you suffer on expenses from HMRC - it probably won’t be a massive benefit depending on your expenses.

If you are on the flat rate scheme, you do not reclaim VAT on your expenses. Instead, you pay a specified percentage of your gross (including VAT) turnover to HMRC.

This may be 16.5% if you are considered a limited cost trader - you need to check this!

For example, if you have sales of £1,000 + VAT this will be gross sales of £1,200. You will pay 10% (or 16.5%) of the £1,200 over to HMRC, being £120. You can’t reclaim any VAT on your purchases (a couple of exceptions).

You will therefore have £80 additional profit which itself will be subject to income tax and national insurance. This £80 additional income should be compared to the input VAT that you could’ve recovered if you were not on the flat rate scheme to see if the flat rate scheme is beneficial for you.

The above is just the bare bones. Please get professional advice, it will save you in the long run, without a doubt.

 

[efeseu]

Thanks for the replies.

Alan, so that means I'll only pay the 10% of my earnings after the 3 months, right? Fuel will definitely cost more than the £200 in that period of time for business use, so I think I'm safe.

 

[Alan]

The details are here
https://www.gov.uk/vat-flat-rate-scheme

but as HMRC and @Adam93 says
"Talk to an accountant or tax adviser if you want advice on whether the Flat Rate Scheme is right for you."

I'm not an accountant, and I know a lot more about VAT and finance than you do ( having run several VAT registered businesses inside and outside the flat rate scheme ) and personally I never take any decision like that without bouncing it off my accountant.

 

[Adam93]

Careful! Fuel doesn’t necessarily count as ‘relevant goods’ for the purposes of the 2% rule.

Have a read of VAT Notice 733.

There is so much to know, and the rules change all the time! A lot of people think they’re doing it right until they get their first compliance visit from HMRC.

 

[Somos Accounting]

VAT can be particularly complex and it will depend on your exact position.

There is then Making Tax Digital (MTD) to consider for VAT, though based on your opening post your turnover won't be above the VAT registration threshold so you joining the regime will be voluntary. Though it is worth keeping your records electronically, in my opinion.

 

[efeseu]

Careful! Fuel doesn’t necessarily count as ‘relevant goods’ for the purposes of the 2% rule.

Have a read of VAT Notice 733.

There is so much to know, and the rules change all the time! A lot of people think they’re doing it right until they get their first compliance visit from HMRC.

I've spoken with an accountant today, and she said that this fuel will count. And also the rental for the van will count too (200/week).

I've understood the VAT bit. So after the extra 20% a day, it works out to be £144 per day (VAT included). After 3 months (of 6 days of work per week) it'll work out to £10368. Then 10% VAT, which I'll need to pay back is £1036.80. Which means that I'm left with £9311.20 after VAT return after 3 months. Correct me if I've calculated this wrong or made any mistakes.

Thanks for the replies guys.