I had a case today with a client on FRS and cash basis who will probably will qualify as Limited Cost Trader.
However I did not find anything specific on how to calculate the turnover when cash base is used. Do I have to use the paid only sales plus VAT or gross sales on the accrual basis?
The guide is saying 'VAT inclusive turnover in a prescribed accounting period'.
Does it mean turnover in general - accrual basis or if you are on a cash basis you need to use cash basis too?
Are you trying to work out the turnover for the "relevant goods" check, so you can apply the 2% to it?
If yes, even if the VAT is declared on a cash basis I've been told by accountants that an accrual method should be used for this because that is a more accurate representative than what they physically received/paid during that time (and the figures you use will also match the year end accounts for the same period).
How are you finding the new LCT rules? I've only got one client who's actually had to use the 16.5% rate so far (they have absolutely no expenses), others it has just been more beneficial to remove them from the scheme, although I do still have the issue of the vehicle repair companies where parts supposedly don't count as "relevant goods" because they're not in the transport sector.... still waiting for HMRC to clarify!
Thank you for your reply! This is how I did it but was not sure.
It is shocking for the clients who completely ignored the new rules.
I advise them to by stationery, maintenance products as electrical staff, also cleaning materials.
It all depends on they plans for the future. They could just move to standard scheme if more VAT expenses, purchases are expected.
Yes the July ones will be where things really get going... although it will be easier than trying to split the figures which is what I'm faced with at the moment with the April returns!
It's actually been a good option for two or three of mine to switch to annual VAT accounting instead because it's more feasible for them to have spent £1000 over a whole year on goods, rather than trying to meet a £250 total each quarter. We'll see!!
How are you finding the new LCT rules? I've only got one client who's actually had to use the 16.5% rate so far (they have absolutely no expenses), others it has just been more beneficial to remove them from the scheme, although I do still have the issue of the vehicle repair companies where parts supposedly don't count as "relevant goods" because they're not in the transport sector.... still waiting for HMRC to clarify!
Would it not be better for them to be on the standard scheme? I do agree that it's wrong that a vehicle repair business should be excluded on this basis and hopefully HMRC will see sense.
There was a mahoosive discussion on aweb about it, with some arguing that the present rules allowed it, and some saying it didn't. I will have to see if I can find the link.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
He would be a few hundred pounds worse off each quarter by not using the FRS so we're trying to keep him on it if we can (not many VAT registered suppliers).
I think I've seen that argument on accounting web - assume it will end up coming down to one of those situations where HMRC gets challenged and it's ruled that the intention of the new rate was not to single out this type of business but rather to stop those with next to no expenses making such a profit, so SHOULD be ok.... but you never know....
An update to my post above in case anyone comes across this - HMRC have now confirmed to me that vehicle parts purchased as a cost of sale would definitely be classed as "relevant goods" for the Limited Cost Trader check. It still excludes vehicle parts purchased to repair company owned vehicles. It always made sense to include them but with the guidance not specifically mentioning this scenario it was a concern.
-- Edited by fin6y on Tuesday 30th of May 2017 04:10:38 PM