Forum
VAT "flat rate scheme"
I am currently permanently employed (full time) with a company and after having worked in the industry for over ten years I have decided to start doing freelance work (not a LTD company - I do not need to do this as I do all my accounts so I have not registered with company house - plus I work on my own so would be a sole trader) in my free time. I am going to register myself as self-employed (even though I have a full time job) because I will be getting extra income (I definitely have to do this by law).
I am currently not VAT registered and therefore will not charge my clients 15% VAT (and clearly mark on my quotes and invoices that I am not vat registered).
Question: - My main question is is it correct to simply put on my documentation "I am not vat registered" and that is all I need to do?
My turnover will be less than the £67k threshold. I know one advantage of being vat registered is that I can claim back vat on company related expenses.
Question: - In order to do this would my company have to be registered as a LTD company and if I am vat registered under the "flat rate" scheme can I only claim 11.5% back as opposed to 15%?
I know I can register online to become self-employed and also to become vat registered.
Question: - After registering online to become self-employed how soon afterwards can I register for VAT?
Question: - If I register online for the flat rate vat how long does this take before I get a VAT registration number?
Question: - And am I right in charging my client full 15% vat if I am registered under the flat rate vat scheme ?
Any income (total turnover) I make from my freelance work is going into a separate bank account so I can clearly see what I have earned as a freelancer, so tax returns should be a bit easier to calculate.
Thanks for any help answering my queries.
I am currently not VAT registered and therefore will not charge my clients 15% VAT (and clearly mark on my quotes and invoices that I am not vat registered).
Question: - My main question is is it correct to simply put on my documentation "I am not vat registered" and that is all I need to do?
My turnover will be less than the £67k threshold. I know one advantage of being vat registered is that I can claim back vat on company related expenses.
Question: - In order to do this would my company have to be registered as a LTD company and if I am vat registered under the "flat rate" scheme can I only claim 11.5% back as opposed to 15%?
I know I can register online to become self-employed and also to become vat registered.
Question: - After registering online to become self-employed how soon afterwards can I register for VAT?
Question: - If I register online for the flat rate vat how long does this take before I get a VAT registration number?
Question: - And am I right in charging my client full 15% vat if I am registered under the flat rate vat scheme ?
Any income (total turnover) I make from my freelance work is going into a separate bank account so I can clearly see what I have earned as a freelancer, so tax returns should be a bit easier to calculate.
Thanks for any help answering my queries.
- Contact in PM
GTFC
Messages count : 30Likes count : 0Registration : 6 February 2008Hi Matt,
OK, here goes!
Question: - My main question is is it correct to simply put on my documentation "I am not vat registered" and that is all I need to do?
Yes, this is all you have to do. In fact, you don't even need to do that, just don't add any VAT and they will work it out for themselves! There is no legal requirement either way.
Question: - In order to do this would my company have to be registered as a LTD company and if I am vat registered under the "flat rate" scheme can I only claim 11.5% back as opposed to 15%?
You do not have to be registered as a limited company in order to be VAT registered. I'm a sole trader and registered for VAT about three years ago when I hit the threshold, but have never registered as a limited company.
When you register under the flat rate scheme, you explain your business to HMRC and they decide what category you fall into, and hence what rate you pay. For example, they classed me as an 'advertising consultancy' which was about the closest option (I'm a copywriter) which means I pay 9.5%, now 8.5% since the VAT rate went down. Interestingly, even though that dropped by 2.5%, my rate only dropped by 1% so I ended up 1.5% worse off!
With the flat rate scheme, you pay x% (whatever they decide) based on your VAT INCLUSIVE billings, not on your before-VAT billings. Which again doesn't work in the freelancer's favour. So, for example, if you invoice someone £1,000 plus VAT, the invoice amount is £1,150 and then you pay (using my rate as an example) 8.5% of that figure, which would be £97.75. So in effect you make a profit of £52.25. Not bad, but then of course you have to declare that as income and then they tax you on it! So they get you every which way :)
Question: - After registering online to become self-employed how soon afterwards can I register for VAT?
Straight away if you want to, although you don't have to at all, unless you're likely to hit the threshold. This is based on a rolling year, so if in any month your billings for that month mean that you would have invoiced more than £67k (or whatever the figure is) in the last 12 months, then you have to register. I think they give you a month's grace but that's about it.
Question: - If I register online for the flat rate vat how long does this take before I get a VAT registration number?
I seem to recall it took about two weeks.
Question: - And am I right in charging my client full 15% vat if I am registered under the flat rate vat scheme ?
Absolutely. The 'profit' you make on the difference is your perk for keeping your VAT simple and making HMRC's lives easier!
One other thing to add, depending on what your business is, the flat rate scheme is not always best. If you buy in products or services for which you'd like to claim the VAT back, then it might be worth going for the standard option, but the paperwork is a bit more complicated! The flat rate scheme works best if you are just charging for your time in the main.
Hope that helps.
Cheers,
Gill----------------------------------------------------------------- The secret of happiness is to find something you enjoy doing and then to get someone to pay you for doing it!