Flat rate8/25/2023 Your total estimated VATable sales for the next year must be under £150,000 – this includes everything you plan to sell that is subject to VAT. If you’re interested in joining the VAT Flat Rate Scheme, you can apply to HMRC provided your business meets certain criteria. If your business fits into more than one category because you make different kinds of sales, you'd choose the percentage that applies to the majority of your sales and apply that to your total sales. Important: if you’re a limited cost trader, you have to use 16.5% instead of your trade’s percentage! Businesses making more than one kind of sale HMRC has set percentages depending on what your business does.ĭuring the first year that your business is registered for VAT (which is not necessarily the same as the first year you're on the VAT Flat Rate Scheme), you get a 1% discount on the percentages - so you would use, for example, 10% instead of 11% if you run an advertising business. On the Flat Rate Scheme, you pay a percentage of your total sales to HMRC when filing your VAT return. Percentages of sales on the VAT Flat Rate Scheme With the Flat Rate Scheme, you can't claim back any of the VAT you made on purchases, unless you buy a capital asset that cost £2,000 or more including VAT. Claiming back VAT on the Flat Rate Scheme However, you may leave out any sales that are outside the scope of VAT. You need to include any standard-rated, reduced-rated, zero-rated and exempt sales you make in your VAT return. The percentage you pay depends on what your business’s trade is, unless you’re a limited cost trader. Instead of adding up all the VAT you charge and taking away the VAT you can reclaim, you add up all your sales - including any VAT you charged to your customers - and pay a percentage of those sales to HMRC. If you use the Flat Rate Scheme, you charge VAT to your customers (‘output VAT’) and pay VAT to your suppliers when you buy goods or services from them (‘input VAT’) in the normal way.īut when it comes to preparing your VAT return and paying VAT to HMRC you do things slightly differently. ![]() What is the VAT Flat Rate Scheme and how does it work? ![]() ![]() Wonder if you'd be better off on the Flat Rate Scheme? Here's an introduction to the UK's VAT Flat Rate Scheme for small businesses. Would you be better off on the VAT Flat Rate Scheme?
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