How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask taxadvisor.uk Your Own Question
taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5015
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
54961312
Type Your Tax Question Here...
taxadvisor.uk is online now

VAT Flat Rate Scheme. How do I work out profit on my sales

Resolved Question:

VAT Flat Rate Scheme.How do I work out profit on my sales with the above scheme?For example, if my selling price is £10 plus VAT = £12
My Cost Price is £5 plus VAT = £6If the VAT payable under the Scheme is 4% of turnover is it 4% of £10 or £12, and then how do I go on to calculate the profit on the sale?Thank you in advance.Regards,
Submitted: 10 months ago.
Category: Tax
Expert:  taxadvisor.uk replied 10 months ago.

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Expert:  taxadvisor.uk replied 10 months ago.

Thank you for your question

Profit calculation - VAT Flat Rate Scheme

Selling price £12.00 (incl VAT)

Cost price £6.00 (incl VAT

Margin £6.00

VAT payable £0.48 (4% of total sale incl VAT under the scheme)

Net profit £5.52

I hope this is helpful and answers your question.

Expert:  taxadvisor.uk replied 10 months ago.

Hi there

Just checking to see if you need further clarification on how to calculate profit on sale or have I answered your question.

Many thanks

Customer: replied 10 months ago.
Hi,Thank you for your answer.What is confusing me, is that £2 of the selling price in my example is VAT, and if we were asked to produce a VAT invoice, it would be:Goods - £10
VAT - £2
Total - £12So, even though we would only be paying over 48p to the VATman, would a calculated net profit of £5.52 not mean that we are actually making a profit out of VAT?Regards,
Expert:  taxadvisor.uk replied 10 months ago.

Thank you for your reply.

Under Flat rate scheme, you don't reclaim VAT on your purchases. What you are paying to the VAT man is 48p instead of £1. The so called profit (VAT not passed to VAT Office) is there to cover your time and effort and is given to you by the VATman.

I hope this is helpful.

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 10 months ago.

I thank you for accepting my answer.

Best wishes.