The VAT flat rate scheme – In a nutshell

Published on 23rd November 2015

The VAT flat rate scheme – In a nutshell, expert advice from Hugh Mitchell from High Path VAT

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The VAT flat rate scheme is a simplification scheme for small businesses.
These are businesses with an annual VAT exclusive turnover of below £150,000.
How does it work?
You carry on preparing sales invoices for your customers as normal, showing the full amount of VAT, but at the end of the VAT quarter you just add up all the sales including VAT and apply a fixed percentage to the total.
This percentage is what you pay to HMRC.
Different types of business apply different percentages.
For instance, an IT consultant applies 14.5% to his or her gross sales but a take-away applies 12.5%.
Under the scheme you don’t claim back VAT on your purchases or expenses – so no trying to work out what you can or cannot claim VAT on, although you can claim VAT on large plant and equipment purchases.
So normally there are only two figures to put on the VAT return.
You may even end up paying less VAT.
There is even a cash-accounting version of the scheme if that suits you better.
But the scheme doesn’t suit all businesses – always check first with your accountant.
Do not use it if you usually receive VAT repayments, have income that is not vatable, or if you are involved in exports or EU imports.
But for other businesses the flat rate scheme could save you time and money.

Hugh Mitchell
High Path VAT
http://highpathvat.co.uk/
info@highpathvat.co.uk
01823 664 411

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