VAT Flat Rate Scheme
The Flat Rate Scheme was introduced as an easy way for modest corporations to calculate their VAT liability.
The Flat Rate VAT scheme is available to businesses using a taxable turnover beneath 150,000 excluding VAT (also exempt and non-taxable sales really should be below 37,500).
Beneath the flat rate scheme, you merely preserve a percentage with the VAT charged for your buyers. The percentage you preserve varies based upon which industry you will be in.
You ignore VAT in your purchases, the VAT you spend simply becomes a cost. Eg In the event you commit 10 + VAT on stationery, the price of that stationery becomes 11.75.
The flat rate scheme does permit you to reclaim the VAT on ‘large’ capital items – exactly where you devote greater than 2,000 you are able to reclaim the VAT on that item.
Ought to I be on the flat rate scheme?
As you claim a percentage of sales, these with larger sales stand to advantage much more.
These with low purchases (for that reason paying little in reclaimable input tax) also stand to obtain from the scheme.
As an example A company with sales of 149,000 (excluding VAT) and inside the category of “any other activity not listed elsewhere” – 10% flat rate and with negligible input VAT say 500 will save 8,068 per annum by switching to the Flat Rate VAT scheme.
To see how much you might save, attempt the Flat Rate VAT scheme calculator
How do I join the Flat Rate VAT Scheme?
The simplest way will be to contact the VAT assistance line on 0845 010 9000, who will likely be able to take your VAT registration number and relevant details on the telephone, following which you’ll be registered immediately after around 21 days.
Alternatively, you are able to download the scheme application form from HMRC .
How do I decide which sector my company falls into?
If your business has sales in two or much more sectors, you ought to apply the percentage proper to the major enterprise activity, as measured by your sales.
Some sectors are clearer than others. The distinction among “other business services” and “services not elsewhere specified” is far from clear. In case you phone HM Income & Customs for guidance, make sure you hold a note from the name with the person you speak to and the date of the call.
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