Flat Rate VAT: What You Should Know
5th April 2023
The flat rate VAT scheme is available to any business with taxable annual sales of £150,000 or below, excluding VAT.
It was introduced in 2003 to ease the administration needed for small businesses by simplifying the VAT return process. Once you have joined the scheme you can remain until your total VAT-Inclusive business income exceeds £230,000 per annum.
The flat rate scheme pays a fixed percentage of your gross income (percentage amount depends on your trade) to HMRC each VAT period. Use the link to find out your flat rate fixed percentage https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay. You are unable to reclaim any input VAT under the flat rate scheme, except when you purchase capital equipment over £2,000.
During the first year of the scheme you are entitled to a 1% discount on your percentage.
Be Aware! Taxable sales include standard, reduced and zero rated sales, therefore when calculating your VAT liability, your gross income will include zero- rated and exempt supplies. This means tax will be paid on income where VAT has not be charged.
If your business has very little expenses such as a consultant, then this scheme could create a VAT saving for you.
Contact your local Whitings Office for more advice on what VAT scheme is best for you!
Disclaimer - All information in this post was correct at time of writing.
