P&L and Trial Balance Reports

Hi Ian, I’m sure your correct , just wish I understood the maths of it . I was hoping this would help me in the absence of a sum I could do .

rojected income : Vat actual paid @11.5%

net amount (excluding VAT) Operation VAT tax, % VAT amount gross amount (including VAT)
100000 add VAT 11.5 11500 111500

Projected Income : Vat actually charged

net amount (excluding VAT) Operation VAT tax, % VAT amount gross amount (including VAT)
100000 add VAT 13 13000 113000

Projected Income Vat charged @20%

gross amount (including VAT) Operation VAT tax, % VAT amount net amount (excluding VAT)
100000 extract VAT 20 16666.67 83333.33

11.5% / 20%

Difference added back to turnover £5,166.67

Total turnover with derived benefit £105,166.67

Charging 13% VAT

Difference added back to turnover £3666.67

Total turnover with derived benefit £103,666.67

Again I think you’re overcomplicating things and mixing up the “VAT rate” which is a percentage of the net excluding VAT, and the “flat rate percentage” which is a percentage of the total including VAT. The actual situation is more like this:

Scenario total takings FR VAT owed
(11.5% of prev column)
Amount you keep
(i.e. your turnover)
% change
Current (not VAT reg) 100,000 nil 100,000 n/a
Keep current prices 100,000 11,500 88,500 ↓11.5%
Increase prices by 5% 105,000 12,075 92,925 ↓7.075%
Increase prices by 10% 110,000 12,650 97,350 ↓2.65%
Increase prices by 13% 113,000 12,995 100,005 ↑0.005%

For the purpose of this modelling you don’t need to care about the 20% VAT rate - yes, this is how you have to record those prices on a VAT invoice, but for modelling the effect on your GP% when you’re operating on flat rate VAT all you care about is the overall gross total (and of course these numbers all assume the higher prices don’t result in fewer sales, which is in itself somewhat unrealistic).

The sweet spot is a business decision for you, to balance how far you can increase your prices without driving away customers vs how many percentage points you can afford to knock off your gross margin and still remain a viable business.

Either I’m as thick as a whale omelette (regarding maths ,most likely true) or we are getting to the crux of the matter… From what I’ve read I do indeed need to worry about the 20% as stated before the difference between what I charge and 20/% gets credited back to my turnover (quickfile does this ) The above does not reflect this. anyway I’ve probably wasted enough of your time, i’m sure it’s my misunderstanding. I’ll digest the above and it may percolate through my synapses that mathmatically challenged . It’s lucky I cook a good meal and run a good business as a career in the money markets though I’m probably qualified to be the chancellor of the exchequer !

What I meant by

is that if you make a sale for £11.30 and the customer asks you for a VAT receipt then you have to show it on that receipt as £9.41 net plus £1.89 VAT @ 20%, but for your own turnover calculations you’re just paying HMRC 11.5% of the £11.30 (= £1.30) and keeping the rest yourself (£10).

The fact that QuickFile represents this as a split between 4000 and 4999 is something of an implementation detail, for forecasting it’s the final “total turnover” line on the P&L that you care about and that is only dependent on the total retail price to the customers and the 11.5% flat rate.

Hi all,

Obviously, there was more to the problem than met my eye.

I have to say that the whole QuickFile internal adjustment thing is probably competent but tricky as well. I do wonder how a receiver of keepitsimple receipt ( incl VAT at 20% ) might then, for his/her own purposes, have to adjust it thereafter

However, trying to recall the above thread, and speaking as a non accountant of course, is it not as simple as “go into advanced settings” and simply implement 11.5% as the VAT rate that you use and make sure gross and net accurately reflect that at either / both detail and overall levels?

They wouldn’t - as far as they’re concerned KIS has charged them inclusive of 20% VAT and that’s what they’re entitled to reclaim on their own VAT return if they are VAT registered (unless they are also on flat rate, of course, in which case they treat the whole VAT inclusive total as an expense just like KIS would with their own suppliers).

My suggestion in the other thread was that if you’re not giving QuickFile invoices out to your customers then recording your totals in QuickFile as if they were inclusive of 13% VAT (not 11.5) would mean the flat rate adjustment that happens at VAT return time would be near zero and the P&L report would be closer to reality at all times, not just when you have completed a VAT return to make the 4999 adjustment.

Hi Ian ,
With fear of getting us all chasing our tails again
I don’t think this is possible (or at least very confusing) in HMRC’s eyes my transactions whether by invoice or cash are inclusive of 20% VAT. maybe that is where the confusion lays.

  • f you use the VAT Flat Rate Scheme – Your day-to-day processing remains unchanged and VAT calculates at the standard, lower, exempt, zero rated and No VAT rates as normal. The flat rate percentage applies when you calculate your VAT Return. The amount of VAT you pay to HMRCcalculates as a percentage of your gross turnover, this includes all sales including those which are Zero Rated and Exempt transactions.

You can choose to use either the invoice or cash-based VAT Flat Rate Scheme. If you choose invoice-based, the VAT calculates at the point of invoicing. If you choose cash-based, it calculates at the point of payment.

The difference between 11.5 % and 20% is credited back to turnover and as my accountant has stated (sorry for caps)

IT WILL BE ADDITIONAL TURNOVER, MAY BE DISCLOSED SEPARATELY UNDER FLAT RATE MARGIN INCOME BUT IN ESSENCE IS ADDITIONAL TURNOVER WHICH IS TAXABLE INCOME
Still digesting your other post where you kindly laid out some figures

So the way VAT works you collect 20% VAT on your sales on behalf of HMRC. In the normal case without the flat rate scheme they then let you deduct any VAT you paid to your suppliers and then hand them the difference.

The flat rate scheme simplifies your record keeping: rather than you having to keep track of exactly how much VAT you’ve paid to suppliers and deducting that specific amount from your sales VAT, HMRC instead let you deduct a fixed proportion of your sales VAT (expressed in terms of the flat rate percentage you apply to your VAT-inclusive sales) independent of how much you paid out to suppliers.

The thing about calling it “additional income” is that with normal VAT the purchase VAT you deduct is recorded in your P&L by reducing the expenses side (because the cost to you of your purchases is now the ex-VAT rather than inc-VAT price), but on flat rate the “rebate” is recorded by increasing your turnover - the bottom line effect is similar, it’s just whether you record it as more coming in or less going out.