On 22 November 2023, Chancellor Jeremy Hunt presented…
The amount of VAT a business pays or claims back from HM Revenue and Customs (HMRC) is usually the difference between the VAT charged by the business to customers and the VAT the business pays on their own purchases.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT to HMRC;
- you keep the difference between what you invoice your customers and pay to HMRC;
- you cannot reclaim the VAT on your purchases – except for certain capital assets over £2,000; and
- to join the scheme your VAT turnover must be £150,000 or less (excluding VAT), and you must apply to HMRC.
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; and
- it helps manage cash flow.
HMRC has launched new online form for businesses to apply for the VAT flat rate scheme: Form VAT600FRS.
The Flat Rate Scheme isn’t the best choice for all businesses. Depending on your sector, you may find that you pay more VAT this way than through standard VAT accounting, so please talk to us and we can give you all the information to make the right choice.