Have you heard of the Flat Rate VAT scheme? Maybe you want to know more about it and find out what the benefits could be to your business? Well, look no further!
If you are a small business with a VAT taxable turnover of less than £150,000 (excluding VAT) then you are eligible for this scheme.
If you want to just know more about VAT generally, then please see our previous blog and video telling you ‘VAT it’s all about’ .
Why should you care about the Flat Rate VAT scheme?
Well, it can often dramatically reduce the administrative burden of doing your VAT returns. (Hallelujah! I hear you cry!)
In some cases, it can also mean you end up with a profit! (Thought that might perk you up)
Here’s the science bit…
Instead of calculating VAT on each transaction, you account for your VAT payments as a whole, as a percentage of your total turnover – which means less time keeping books, and more time in the pub/with your kids/having fun/working on your business. What else?
You can get a discount of 1% of VAT in your first year of using the Flat Rate VAT scheme. You have fewer rules to follow – no more pulling out your hair trying to figure out what purchases you can/can’t claim VAT on. One of the key advantages of this method of calculation is you will always know what percentage to leave aside for VAT. Happy days!
The ‘Flat Rate’ part is quite self explanatory as each different sector or specialisation has a different flat-rate percentage.
For example: Photographers have a flat rate percentage of 11%, Computing & IT Consultants have 14.5% and for Oil and Gas contractors, this will depend on what you do i.e Engineering is 14.5% whereas Management Consultancy is 14%.
Bear in mind though, these flat-rates tend to change each year, and there is an ‘Other Business Activities Not Listed’ category, if your specific area isn’t immediately available.
If you want to check what your flat rate vat percentage would be you can scroll down this page on the HMRC website, or ask your FW Accounting adviser.
The Flat Rate VAT scheme is not right for everyone. So if you would like to know more or if you think it would be suitable for your business to be Flat Rate VAT registered, please give your friendly adviser at FW Accounting a shout and they will be happy to help.
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