martin_p wrote:Calculating it certainly is. Besides I’m not doing all the grunt work of working out tax when you’ve made your calculation so easy by not being VAT registered, especially when there seem to be a lot of VAT deductible expenses which is another great tax avoidance ruse contractors and consultants can use.
martin, I think you are just trying to wind me up? No?
Let's add VAT to the numbers: revenue £70,000 + VAT (at 20%) £14,000 - Total £84,000.
VAT charged on the expenses I mentioned; Add £200 to lawyer fees of £1,000. Do the same to the other fees, add 20%.
Now, I know you know how to complete a VAT return (you do, don't you?).
VAT on sales this quarter/year (let's assume we can roll it all up into 4 quarters and do return as 1 year): VAT collected £14,000.
VAT on inputs, let's say that this comes to £600 (I haven't checked back to all expenses figures, but let's assume that one or two weren't registered for VAT, and so those expenses didn't charge VAT).
Let's also assume that the entertainment expenses include VAT in the £500 (I should have chosen £600, I guess you will understand why...), so £500 = £X + 20%, let's call it £417 + VAT £83.
But, you already know this, HMRC don't let you reclaim VAT incurred on entertainment expenses. So, we didn't need to do that calc.
Hint: when you are calculating P&L and tax due - whichever way you chose to treat wages or dividends - entertainment is not an allowable expense to include in your tax due calc.
So, let's complete your "another great tax avoidance ruse contractors and consultants can use."
VAT collected on sales £14,000, VAT paid to other VAT registered organisations £600. Therefore, VAT payable to HMRC £13,400.
It's a great tax avoidance ruse. You receive £14,000 VAT, you pay out £600 VAT and you pay the rest to the government.
To be fair, there used to be some slightly more favourable rules for the "little guys" - but these were got rid of a couple of years back. But, if you were using these arrangements, they were the ones that the government had set up. So far as I'm aware paying the tax that the government has said is due has never been "a great tax avoidance ruse..."
I will sleep well tonight.