Clear Books has created a new feature to enable users to make comparisons between standard VAT (in which VAT is based on the difference between VAT charged to customers and VAT paid on purchases) and the Flat Rate Scheme (FRS) (in which VAT is paid at a fixed rate applied to VAT inclusive sales, with the rate being dependent on the type of business).
Whilst the feature is available to all users, accountants and bookkeepers will find it useful to advise clients which scheme is most likely to be beneficial to them.
The feature works differently depending upon the current scheme being used, as follows:
If you are currently using Standard VAT
You can enter the appropriate Flat Rate % for your business type and, choosing a twelve month period, compare the VAT currently paid with an approximation of the VAT you would have paid under the FRS. You can view this for each of the four quarters as well as in total over the full twelve months.
As a business can only join the FRS if its turnover is likely to be below a set limit (currently £150,000) in the next year, the screen also shows the business turnover in the previous twelve months as an indication.
If you are currently in the Flat Rate scheme
The feature will show the same comparison as above for a twelve month period, only now it compares the VAT currently paid under the FRS, with an approximation of the VAT you would have paid under Standard VAT accounting.
As a business may only remain in the FRS whilst its annual VAT inclusive turnover is below a set limit (currently £230,000) the screen also shows the annual business turnover and provides a warning when this reaches 90% of the limit.
We’d like to thank Andy Maitland from Maitland Chartered Accountants for assisting with the development and implementation of this tool.
Disclaimer: Our new VAT comparison screen estimates the potential tax owed when looking to change your VAT scheme. Please note that this is only an estimate and will depend on the recording of expenditure using the correct VAT rate, even if operating under the FRS. If you feel you would benefit from changing your VAT scheme, we recommend contacting HMRC or your accountant who will be able to provide advice specific to your scenario. Clear Books plc can not be held liable for any loss (including loss of income) when changing VAT schemes based on this estimate.
