The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
The flat rate scheme was introduced by HMRC to simplify VAT accounting for small businesses. Businesses using the scheme will apply a single VAT percentage to the businesses' relevant turnover during the period. The flat rate scheme is intended to reduce the administrative burden on small businesses because they are not required to record the VAT on sales and purchases in their accounting records.
The main point to note is the fact that businesses using the scheme will charge VAT at the applicable rate on all sales made but this is not paid to HMRC. The business cannot recover any VAT incurred on costs, unless the goods are capital expenditure items costing at least £2,000 including VAT. The business will apply the fixed rate percentage to the gross sales turnover and this amount is paid to HMRC as output VAT.
The main rules regarding the application of the scheme are outlined below.
These are the main advantages to using the scheme:
it is much simpler to complete the VAT return as a flat percentage is applied to the turnover in order to calculate the amount of output tax due. The business will also reduce the amount of time spent recording VAT on sales and purchases
businesses cannot recover VAT incurred on items of expenditure, with the exception of certain capital items, so they do not need to determine whether VAT is recoverable on the purchase
if the scheme is used together with the annual accounting scheme it can make a significant difference to the cost of complying with VAT requirements
The scheme will not benefit all businesses and the following should be considered when making a decision regarding whether or not to use the scheme:
the business will need to calculate the VAT due and issue a VAT invoice to any VAT registered customers. Therefore if the majority of the business’ customers are VAT registered there may be little administrative benefit
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
There are several sets of provisions in the Taxes Acts which relate to ‘close’ companies, most of which are anti-avoidance measures aiming to catch transactions between those companies affected and their owners, where there may otherwise be a tax advantage. Broadly speaking, most owner-managed or
This note offers guidance in respect of the administration of company tax returns. If a company or organisation is subject to corporation tax they will have to complete and file a company tax return for each accounting period. A company or organisation must, in the main, file a return even if they
The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are
This guidance note considers the capital gains tax implications where shares are sold in exchange for new shares.The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:•new shares in the vendor in exchange for shares
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.