UK VAT flat-rate scheme

Corporate tax is not on your earnings like flat VAT. It is on your taxable profit. Every tax-deductible expense is decreasing your taxable profit.

Not to mention, by using this inflated tax rate, you are essentially decreasing your income on P&L which is not correct from accounting point of view.

In future, new module could be implemented which could handle it by estimating your corporate tax and making automatic entries but for now, corporate tax should be entered as an expense once a year by journal entry which is traditional method.

Oh yes, I fully intend on changing my VAT FRS tax code back to 14.5% and making a journal entry to account for corporation tax. It’s just that the 31.6% gives me an accurate estimation/visualization of my true ongoing tax liability for now.

I have very little expenses so my corporation tax liability is effectively just 20% on my earnings after the 14.5% VAT (20% of the remaining 85.5%, hence the 31.6% tax in total).

I would definitely welcome a module to do this nicer though! At the moment, the #1 requirement for me in an accounting app is to calculate my total tax liabilities as I go.

I’m new to using Manager (which is excellent for my needs) although I don’t seem to be able to get the VAT FRS working correctly.

For instance, on a sales invoice with a net value of £7040.00 it calculates a VAT liability of £1,224.96 (this is shown in Tax Payable). However, the correct liability should be £1020.80 based on 14.5% Flat Rate.

I’ve added the VAT FRS tax code and have also edited it to set the correct Payable rate (14.5%) and am using that rate on my invoice. Could someone tell what I’m missing?

Also, I did see mention of a Corporation Tax element being added, did this get done?

Thanks for help :smiley:

It looks like if only VAT FRS tax code was used, the invoice could not be set as tax inclusive. Anyway, I fixed this issue in the latest version (15.1.75).

Make sure to check the box “Amounts are tax inclusive” on invoice form once you upgrade.

We have a similar flat-rate tax scheme here in Switzerland. Allowing to charge 8% and only having to pay 6.1%. Is there a way to implement this, or allow something similar in customization?

@mklarmann, do you mean that you collect 8% from the customer but only remit 6.1% to the government? In other words, are you making a profit on the tax you collect for the government? Or do you mean that when you charge tax you charge 8%, but when you pay tax on purchases you make you only pay 6.1%.

The first scenario would be more complex. The second just needs two different tax codes to select.

The first one. The official information you find here: https://www.estv.admin.ch/estv/de/home/mehrwertsteuer/themen/saldo--und-pauschalsteuersaetze.html

This specific Swiss tax, makes it hard for us to use the invoice feature in manager.io.

I am sorry, @mklarmann, but neither my German nor Italian is good enough to translate your linked page. I notice this particular page has no English version available.

However, if I understand the tax scheme correctly, you will have to make periodic journal entries to clear the portion of the Tax payable that you do not remit to the government. Perhaps some of the other Swiss users could explain how they handle the situation.

I assume 6.1% is your personalized tax rate but different businesses will have different payable rate. Is that correct?

yes, indeed. Businesses have depending on their max. turnover a different rate:

0,1 %, 0,6 %,1,3 %, 2,1 % max. CHF 5,02 Mio.
2,9 % max. CHF 3,76 Mio.
3,7 % max. CHF 2,95 Mio.
4,4 % max. CHF 2,48 Mio.
5,2 % max. CHF 2,10 Mio.
6,1 % max. CHF 1,79 Mio.
6,7 % max. CHF 1,63 Mio.

This tax only applies under special conditions. They may all charge 8% VAT.

@Tut What we currently do is to bill 8% regular. And make a journal entry to subtract 1.9% again.

OK, here is the thing. I’ve implemented VAT flat-rate scheme in Manager but the implementation is a bit complicated and want to simplify it before extending the support in other countries. Possibly I’ll make it so you will be able to create custom tax codes which will have two rates… the “official” and the payable rate.

Have been reading this item with interest as i don’t seem to have a problem using manager.io for flat rate vat. All sales invoices are sent out using the tax code for 20%flat rate, and pay the HMRC our given rate which is 10% of the total (i.e. net + 20%vat). Since purchase vat is not included in the calcaulation it’s not recorded. I do only do book-keeping but the accountant receives all the paperwork at year end with a trial balance and seems satisfied. Do you think I am doing something wrong or I am just lucky it works for me. I wouldn’t like to have to manage changes that may upset this.

@patchworkfields, are you using VAT FRS in-built tax code? If yes, then you are doing it right.

Yes, I am - thanks for confirmation.

impressive! thank you. I will run this through our accountant and come back with some feedback if needed.

Did you mean by other countries, other then Switzerland or UK? We would be happy to be able to use the feature by end of march…

Not sure I’m able to deliver by end of March. Right now, I’m trying to organize all the feature requests I’m getting and create some fair system in which order to implement them.

Hi all,

Quite new to Manager but did VAT FRS ever get implemented i cant seem to see this with the available choices of built in tax codes.

essentially i want to charge 20% VAT to the client and pay 15.5%, are there any workarounds that im missing?

See the last topic in this Guide: https://guides.manager.io/8901.

Thanks @Tut that really helped