Backdating Registration under Flat Rate Scheme

by CG on Wed Mar 10, 2010 1:31 pm

Hi

Please can anyone help me with this.

I have been told it is possible to backdate VAT registration on the Flat Rate scheme. This would be voluntary as turnover does not exceed the threshold.

Is this correct? I didn't think it was because it appears to be an exercise in raising money - billing the client for more money and paying part of it back to HMRC. Or am I missing something here?

Many thanks for any advice here.

by **Budget83** on Wed Mar 10, 2010 5:57 pm

I am not aware you can backdate the flat rate scheme.

Out of interest why o why would you volunteer for the flat rate scheme if the income is below 67k. It would mean you pay vat but can only claim capital items of over 2k.

by CG on Thu Mar 11, 2010 4:27 pm

Thanks for your reply.

I finally got through to the helpline who said it was possible to backdate the flat rate scheme but as this was a voluntary registration it may not be granted for definite.

There is very little capital expenditure in this business, so wouldn't the flat rate scheme still be the best one to go on?

by **spidersong** on Thu Mar 11, 2010 5:55 pm

What Budget83 is concerned at is that you are registering just to give the government money.

However there is of course the consideration that if you are an atypical trader with very little expenditure you may be able to turn a profit if dealing business to business i.e you increase prices 17.5%; customers don't care as they recover. You only need to pay 8% (say) of gross turnover over to HMRC meaning that the difference between 17.5% on net prices and 8% on gross turnover is yours to keep.

Of course you need to have done your calculations carefully, and don't forget that this retained VAT will be subject to tax, but if you are atypical for your trade class you can be better off registering and using a flat rate (but only really if business to business of course)

by **Budget83** on Fri Mar 12, 2010 8:34 am

I see where spidersong is coming from and its very clever9never thought of using the scheme in that mannor before). However he is totally right your customer would have to be vat registered themselves for them not to get upset about having a 17.5% price hike.

I would go away and and spidersong says look at the last 3 months of trading as an example and work out:

1) what you would have paid on the flat rate had you been registered

2)what you would have paid on the standard scheme

Comapre profits and as long as that period of trading was typical I would base my decision on the results.