NEW VAT FRS rate.

[xdamt]

Hey

I was wondering if anyone is doing anything to stay within there original rate on the FRS?

Background: My turnover (VAT inclusive) is £150,000 and my original rate was 12%, running a labour only company means that I made nearly £7K on VAT per annum.

So My question is, is anyone is in a similar situation and what are the best ways around this? By trying to qualify for the 2% spend on applicable purchases I could keep my original rate.

I could just spend £3K on office materials (cartidges, paper which is way more than I need obviously) but even spebding £3K on "supplies" I will still be almost £4K better off even if I don't use the supplies.

I also have read a few articles on "expanding my business" and its definatley worth it. IE Trying my hand at dealing in ART or watches and trying to make a profit that way. Even if you lose the money you invested and had to sell the items at a lose, I believe you would be within the new regulations.

Any thoughts would be much appriciated.

Thanks

[les35]

You should appreciate that the FRS was never introduced to reduce a taxpayer's VAT liability, but to reduce administration costs. The introduction of the Limited Cost Trader rule is to address alleged avoidance.
To 'get around' anti-avoidance legislation is therefore tricky. It is meant to be!
Most people I know are reverting to conventional accounting, with a minority sticking with the FRS, and paying a bit more. Very few are buying more expensive stationery, etc., to get around it!

[xdamt]

"Expensive stationary".....never occured to me, Thanks! I've always wanted a mont blanc pen. Now I can buy one every quater!

[robbob]

Hello xdamt

I could just spend £3K on office materials (cartidges, paper which is way more than I need obviously) but even spending £3K on "supplies" I will still be almost £4K better off even if I don't use the supplies.

You could spend 3k but hmrc say that you can't count the full 3k in your calculations if you are "stockpiling" items !!

From the advise in notice 733 it says

Examples of supplies that aren’t relevant goods
goods which are bought solely to meet the test, as these would not be used exclusively for the purposes of your business. For example, if the quantity of goods being bought can’t reasonably be used by the business and are simply ‘stockpiled’ or thrown away, even if the business may normally use those items is smaller quantities such as office materials

I also have read a few articles on "expanding my business" and its definatley worth it. IE Trying my hand at dealing in ART or watches and trying to make a profit that way. Even if you lose the money you invested and had to sell the items at a loss, I believe you would be within the new regulations.

Do you have anywhere in black and white that indicates this is the case? - in your defense hmrc did some last minute changes to the flat rate notice 733 that means that some articles dated prior to the end of Feb 2017 may have given advise that was effectively out of date before it ever became effective.

Notice 733 contains the following

Relevant goods are goods that are used exclusively for the purposes of your business, but don’t include:
goods for resale, leasing, letting or hiring out if your main business activity doesn’t ordinarily consist of selling, leasing, letting or hiring out such goods

[xdamt]

Hi Robbob

I agree with the stockpiling of stationary and it would not meet the test. But a £800 pen (fountain, ball point, fine liner etc.) bought two out of the four quarters can hardly be described as stock piling. The grey area is if they suggest that it was bought solely to meet the test. However, I can't see how HMRC can say I can't buy a £800 pen with my companies’ money?

Do you have anywhere in black and white that indicates this is the case? - in your defense hmrc did some last-minute changes to the flat rate notice 733 that means that some articles dated prior to the end of Feb 2017 may have given advise that was effectively out of date before it ever became effective.

I think this was the case that it was changed as in section 4.10 its talks about starting and stopping other business activities.

I use specialist equipment in my line of work and was wondering whether this would be included in "relevant goods" say for instance a sverker or omicron? I think I will call them and clarify this issue as I might be eligible down this avenue.

[les35]

You need to check the 2% test each VAT period.

[robbob]

But a £800 pen (fountain, ball point, fine liner etc.) bought two out of the four quarters can hardly be described as stock piling.

I would totally agree with that statement.

I use specialist equipment in my line of work and was wondering whether this would be included in "relevant goods" say for instance a sverker or omicron? I think I will call them and clarify this issue as I might be eligible down this avenue.

I would recommend closely looking through notice 733 so you understand all the finer points - section 4.6 confirms that any capital items do not qualify as goods so presuming your Sverker (780?) is retained equipment then this will not qualify - same goes for the Omicron

Relevant goods are goods that are used exclusively for the purposes of your business, but don’t include:
capital expenditure goods of any value,

https://www.gov.uk/government/publicati ... businesses

[koru]

To me, it is clear from the latest VAT Notice 733 that HMRC intends to take a tough line on this, as they see themselves (rightly or wrongly) as preventing abuse. I would expect they would argue a £800 pen is a capital item, so not relevant goods.

Any business whose expenditure suddenly rises from what it previously was is, in my view, likely to face a presumption that the increase is not exclusively for the business.