Flat Rate Scheme Sales Invoices

[Booklynn]

Hi All,

I am having my first taste of the flat rate scheme and although I understand the principles of what to do, I fall down on perhaps what you all might think would be the easiest bit to understand.

Here goes:

My Client bills out monthly to VAT registered customer as follows:

Work done 1,000 net

VAT 175 vat
£1,175 gross

Why are they only ever paid the £1,000 and not the vat inclusive amount.

The previous accountant calculates the flat rate VAT on the gross figure (so VAT paid would be £1,175 x FR), which I agree with, but why does the customer only get paid the net figure every month?

Is there some simple rule that I haven't understood.

Any clarification will be very helpful.

Thanks, Booklynn

[MANHAR]

Hi Brooklyn

Your client should receive the full invoice value from their custmers ie in your eg £1000 + £175 = £1175. The customers [if they are vat registered] will claim the vat element as input vat on their own vat returns so the net cost to them is £1000. If they are not paying the total vat inclusive price ask them why !

The vat your client pays/declares as output vat on its Vat Return will be £1175 x the agreed flat rate percentage.

Hope this helps.

[Generix]

Hi All,

I am having my first taste of the flat rate scheme and although I understand the principles of what to do, I fall down on perhaps what you all might think would be the easiest bit to understand.

Here goes:

My Client bills out monthly to VAT registered customer as follows:

Work done 1,000 net

VAT 175 vat
£1,175 gross

Why are they only ever paid the £1,000 and not the vat inclusive amount.

The previous accountant calculates the flat rate VAT on the gross figure (so VAT paid would be £1,175 x FR), which I agree with, but why does the customer only get paid the net figure every month?

Is there some simple rule that I haven't understood.

Any clarification will be very helpful.

Thanks, Booklynn

Perhaps you mean that for accounting purposes the net sales value is the only one recorded in the P/L?

This is because the output VAT collected is to be passed onto HMRC.

On this point has anyone found a way of making profit from the FRS disappear?