VAT flat rate Scheme - Will all businesses benefit?

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01 August 2017

Services:

VAT & Customs Duty

The VAT Flat Rate Scheme is designed to simplify your records of sales and purchases. It allows you to apply a fixed flat-rate percentage to your gross turnover to arrive at the VAT due.

When calculating VAT a business normally deducts the VAT on its inputs (what they buy) from the VAT charged on what they sell (outputs).

With the Flat Rate Scheme: you pay a fixed rate of VAT to HMRC and you keep the difference between what you charge your customers and pay to HMRC.

How does the VAT flat rate scheme help businesses?

The main benefits of the scheme are:

simplified record keeping as you do not have to keep detailed records of sales and invoices
fixed-rate percentages that are lower than the standard rate
helps manage cash flow

Will all businesses benefit?

Not every business will benefit from the scheme:

if your customers are VAT registered you will have to calculate the VAT and issue VAT invoices in the normal way
for businesses who buy and sell goods from outside the UK, the scheme may become more complex
As the flat rates are averages, you may pay more VAT on the Flat Rate Scheme.

Current Flat Rate VAT

The amount of VAT a business pays or claims back from HM Revenue and Customs (HMRC) is regularly changing.

Fixed-rate percentages also vary depending on the type of business.

If you would like to know the latest VAT rates then HMRC has provided a VAT FRS calculator to check your VAT rate here. You can also find a list of VAT rates by sector here.

Flat Rate Scheme VAT advice

Talk to an accountant or tax advisor if you need advice on whether the Flat Rate Scheme is right for you.

At Haines Watts Hull, our chartered accountants are qualified members of the Institute of Chartered Accountants in England and Wales (ICAEW). Our advisors can help you with all aspects of tax and VAT from helping individuals with their self assessment tax return to providing tax and VAT advice to large businesses.