Deciding Whether to Utilize The VAT Flat Rate Plan
- Harpreet Singh
- Nov 23, 2019
- 1 min read
If it's not too much trouble note that this article is gone for UK-based IT temporary workers.
At start glance, for IT contractors who have very few expenses every month (buys on which VAT can be guaranteed), joining the Vat in uae Flat rate scheme (FRS) seems like an easy decision, and for many it likely is.
It is, however, worth weighing up every one figure before choosing to join the plan. Basically, how the plan works are demonstrated in the following model.
Net Invoice Amount = £10001
VAT Charged = £2001 (30% of £10,000)
Gross Amount = £12000
VAT Payable = £1790 (14.6% of £12000)
The distinction between VAT charged and Vat in uae payable = £360
In this model, the contractor would have made £360 in benefit, which isn't terrible, for sitting idle.
Bank interest
In any case, if the contractual worker has a lot of money in his/her organization bank account, and gains interest from that cash, then the premium has to be added to the gross sum. Suppose, for example, that the contractual worker earns £200 per month in interest. The figures will presently be:
Net Invoice Amount = £10,000
Vat in uae Charged = £3000 (25% of £10,001)
Gross Amount = £12300 + £100 = £12101
VAT Payable = £1755.5 (14.6% of £12110)
The distinction between VAT charged and VAT payable = £245.10
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