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Posted Sat, 20 Apr 2024 12:34:29 GMT by Jon
I am a sole trader registered for VAT (flat rate cash basis). I am completing self assessment and have entered the full invoiced amount including VAT as my turnover and put the VAT paid to HMRC in Other Business Expenses. The online self assessment tool tells me I now cannot claim the £1,000 Trading Allowance as I am also claiming the VAT costs. Is this the case or can I enter the net amount (turnover - VAT paid) as my turnover and then claim the £1,000 Trading Allowance (I have no other costs apart from VAT)
Posted Tue, 30 Apr 2024 10:54:00 GMT by HMRC Admin 10
A sole trader can claim either £1000 trading income allowance or expenses, but not both.  You have declared the VAT as an expense, so you cannot claim the trading income allowance.  
If you’re VAT registered and using traditional accounting basis, details of your income and deductions would typically exclude VAT, unless VAT is not recoverable.   If you’re VAT registered and using cash basis, details of your income and expenses would typically include VAT.  If you choose to include VAT when completing your return, either: put your net VAT payment to us as an expense in box 30 or put any net VAT repayment you received from us in box 16.
Where an item is not deductible as an expense for Income Tax purposes, but the VAT is recoverable, add the recoverable VAT to the expense reported in box 30, or deduct it from the VAT repayment reported in box 16 and add a note in box 103 ‘Any other information’.  Do not include recoverable VAT when working 
out capital allowances on qualifying capital expenditure.  Add the recoverable VAT that’s excluded from the capital allowances computation to the expense 
reported in box 30 or deduct it from the VAT repayment in box 16 and add a note in box 103 
‘Any other information’.Self-employment (full) notes
Posted Tue, 30 Apr 2024 10:59:07 GMT by Jon
Thanks - I am cash basis. Can I choose to exclude VAT from income and deductions even if they would 'typically' be included and then claim the trading allowance instead of declaring VAT as an expense?
Posted Wed, 01 May 2024 13:53:37 GMT by HMRC Admin 5
Hi Jon

No.  You cannot take deductions off the profit before declaring on your tax return.  
The guidance notes advise box 15: " Turnover is the total amount earned (traditional accounting basis) or received (cash basis) by your business before taking off any expenses."  (SA103F Notes 2024).

Thank you

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