[GNC] UK Flat Rate VAT scheme

[Chris Holman]

Hi,

I've been looking for a way to use GNU Cash Business features with the UK
Flat Rate VAT scheme.
I think I've found a neat trick to get GNU Cash to take care of it in an
Invoice - looking at previous emails, there doesnt seem to be a good answer
anywhere.

= Summary of problem

Charge the Customer at VAT Standard Rate(VSrate=20%) applied:
Gross = Net + (Net * VSrate)
      = Net * ( 1 + VSrate )

But pay VAT at VAT Flat Rate (VFrate=14.5% for IT contractors) so Flat Rate
VAT(FRV) due is:
FRV = Gross * VFrate

= A Solution:
At first sight, I couldn't figure out how to get GNUCash Invoices to cope
with this.
Then I noticed the 'Discount' field.
With a once-yearly calculation (or less if VAT rates don't change),
calculate:
* a Discount( Drate) that accounts for the difference between (Net - FRV)
* a VFadj that is a percentage of  ( Net + Discount )

When creating an Gnu Cash Invoice, enter a Percent Discount before Tax (<)
using the following formula:
    Drate = -(VSrate - VFrate - ( VSrate * VFrate ))
Create and use a Flat Rate VAT tax table using the following formula:
    VFadj = (VFrate * ( 1 + VSrate ))/(1 + VSrate - VFrate - ( VSrate *
VFrate ))

They look a bit daunting, but they are pretty easy to derive.

Currently:
VSrate = 20% = 0.2
VFrate (for IT contractors) = 14.5% = 0.145

So:
Drate = -( 0.2 - 0.145 - ( 0.2 * 0.145))
      = -0.026
      = -2.6%

VFadj = ( 0.145 * ( 1 + 0.2 )) / ( 1 + 0.2 - 0.145 - ( 0.2 * 0.145))
      = 0.1695906433
      = 16.959%

Using these figures in an GnuCash Business Invoice, will result in 20% VAT
charged to the customer Account and 14.5% VAT added to VAT liability
Account.
Caveat: It probably means the discount field is not usable for discounts.

If anyone's interested in the proof, let me know and I post it somewhere.

Regards,
Chris - (could have been an Actuary - but happier as a Software Engineer)