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Being on the Flat Rate VAT scheme...

Hi everyone, I've been following the threads very closely and love how everyone networks and helps one another out. I thought I would write a small article with regards to the Flat Rate VAT scheme as I know many individuals in the media and entertainment industry are on the scheme - whether you operate through a limited company or under self-employment.

With the Flat Rate Scheme you pay a fixed rate of VAT to HMRC and keep the difference between what you charge your customers and pay to HMRC. There is a condition however, you cannot reclaim the VAT on your purchases - except for certain capital assets over £2,000.

As long as your turnover is below £150,000, you are able to join up to the scheme - BUT you must be VAT registered obviously, to join the scheme.

As always, I am happy to offer advice and help individuals out.

Keep filming and keep being great.

Matt
www.tap-media.com
matt@tap-media.com

  • Hi Matt, I did look at this, but I hit a problem, perhaps I misunderstood, though.

    My work is partly in the UK, partly deep offshore (eg UAE, Cairo, Lebanon). I do not charge VAT to the offshore clients, but couldn't find clear guidance on whether I'd be liable for the 12-14%-ish from the flat rate scheme on those large non-EU figures as well as the UK ones. What's your view?

    1 year ago
  • Hi Paddy,

    Thanks for getting in touch, regarding the Flat Rate Scheme ("FRS").

    Definitely an interesting query that you have raised. Have you looked at “VAT Notice 733” – section 6.3 and 6.4.

    If the place of supply of your service is not in the EU, then your supply of services is outside the scope of VAT. You do not have to charge VAT or include it on your VAT return.

    So, Lebanon, Cairo, UAE, USA, are all outside the scope of VAT. You therefore ignore them when calculating your Flat Rate Scheme Turnover ("FRST").

    Any services supplied to UK companies, of course, is well within the VAT rules, so you would need to charge 20% VAT and then pay over the 12-14% to HMRC (depending on what sector you fall under).

    If you have clients in the EU, this makes things more complicated as EU supplies will probably have to be included in your FRST, even though you might not charge the client VAT. In these cases the FRS can sometimes prove unfavourable.

    Here, at TAP Media, our main focus is individuals like yourself in the media and entertainment sector, dealing with your tax and accounting affairs. Food for thought if you did fancy a change 

    All the best,

    Matt

    1 year ago
    • Thanks for your generous answer Matt. Let's have a look how things go this year, next year may take you up on your offer :)

      Oh, I don't suppose you have a legal/debt collection service do you? Untrustworthy client owes £xx,000, but it's a bit complex... And dreadfully boring!

      1 year ago
    • @Paddy Robinson-Griffin "Can pay, won't pay? Or just Can't pay?". I have gone nuclear before, sending a long detailed letter explaining how to bankrupt someone and pointing out that I am taking it personally and WILL spend the money to make it happen. If they really want me to.

      Works best if you "accidentally" send it to an employee or other director rather than the idiot.

      Always worked for me so far. It's all about convincing them that you are NOT treating it as a commercial issue, and WILL make their life hell.

      Also worth copying in the tax and VAT people. They draw their own conclusions about the possible misreporting such individuals may have engaged in.

      Have fun, they deserve it.

      1 year ago
  • I use the FRS in my main business. It is def a case of "do the maths" but can produce nice extra margin if your customers are VAT registered and a lot of your costs are not, e.g. freelancers.

    Even if the maths doesn't produce margin, it still has the benefit of simplicity if your T/O. (Simplicity for small biz is what it's for. Margin boost is a bonus).

    Depending on the math, it can make it worth registering for VAT even before you have to. 50K T/O on a 10% scheme is about £5K extra PROFIT.

    1 year ago
  • Hey Paddy, unfortunately, we don't provide a debt collection service. Sorry to hear that clients do not pay, i would suggest you always ask for 50% upfront, then at least you have something in the kitty :-) Sometimes it works, other times it don't. All depends on the client really.

    1 year ago
  • Love it Marlam, switched on nicely! ;-)

    1 year ago
  • *Marlom

    1 year ago
  • Yes indeed. And indeed I would have, but as I say, this time it was complicated. Clearly, never working with those people again!

    1 year ago