A lesson in value

It sounds rather grand but for the last few years I have hired someone to help with the gardening. It's never been my favourite thing, more a chore than a hobby, so getting some help to do the pruning and heavy lifting seems to make good sense.

The chap I have been working with is his own man and he works around his own schedule. I've tried to book him for specific times in advance but he prefers to keep it more flexible. So it turns out that when I need him he's not always available and when I don't need him (in the depths of winter) I get a text asking if we have any work.

That said, he knows his plants and generally his work is tidy and he's reasonably efficient. His hourly rate is quite high but all in all, he is reasonable value for money.

I was walking to town the other day and saw a young chap with a hedge trimmer attacking my neighbour's privet. I stopped for a chat and found out he charged half the hourly rate of my man. This seemed too good to miss so as the garden needed a tidy up I arranged for the young man to come along and have a look. We had a chat about what needed doing and arranged a time.

Big mistake! Turns out this chap is basically a 'man with a lopper' who appears to know nothing about plants. He has butchered the Rosemary at the side of our steps so it has gone from being a luxuriant shrub to a misshapen bunch of leafless twigs. He carved all the flowering heads off the Buddleia to leave a sorry looking clump of withered leaves and he left when the bin was full of debris so one half of the garden was untouched and half was left scarred by his indiscriminate attack.

As the saying goes, 'You get what you pay for'. My new guy was cheap, but an unmitigated disaster. He sent me a text asking if I would like him to come round and finish the other half. I have gently said that I have this covered

So I am back with my somewhat inflexible but knowledgeable and expensive original gardener. I rather sheepishly told him about my trial with the other chap and he took a little too much pleasure in letting me know what a mess he had made. I think I heard him whistling and chortling while he went about his work.

So a few lessons learned there but the main one being that 'cheap' isn't necessarily good value. I will take a little more care next time I think something is too good to miss.

www.base52.co.uk

VAT Flat Rate Scheme - are you getting the calculation right?

I think it's well known now that the VAT Flat Rate scheme changed with effect from 1 April this year.

The government introduced a new concept of 'Limited cost traders' (LCTs) which have expenditure on 'goods' of less than 2%.

For these LCTs, if they remain on the Flat Rate Scheme they need to use a new Flat Rate of 16.5%. Typically, many will have been management or IT consultants with 'old' flat rates of 14% or 14.5% respectively.

Ok, so that's an increase but it's still worthwhile, right? 16.5% is still less than 20% so it's still possible to make a 'profit' on the scheme? In fact, this is wrong.

Here's the maths:

VAT charged to customers on a net sale of £100. £100 x 20% = £20

VAT payable to HMRC at 16.5% Flat Rate. £120 x 16.5% = £19.80

The key thing here is the Flat Rate percentage is applied to the VAT inclusive amount. 

There is therefore virtually no benefit in remaining on the scheme as an LCT and we have advised all our clients to withdraw and change to standard VAT accounting. Even with very modest expenses which incur VAT, they are likely to be better off if they make this change

I have a suspicion that some businesses are getting this calculation wrong and still feel they gain a benefit using the 16.5% Flat Rate as an LCT. I have no hard evidence for this other than conversations I have had with several business owners who believed the new Flat Rate should be applied to net sales.

Misinterpreting the rules will not be seen as a reasonable excuse by HMRC if the VAT declared and paid is incorrect. 

So please check your calculations. The devil is in the detail and there's a big difference between net and gross sales.

https://www.base52.co.uk/factsheets/vat/vat-flat-rate-scheme