Title: 
VAT Flat Rate Scheme

Word Count:
374

Summary:
The Flat Rate Scheme was introduced as an easy way for small businesses to calculate their VAT liability.


Keywords:
Bookkeeping UK, Bookkeeping, book keeping, book-keeping, bookkeeper, book-keeper, book keeper, book keeping UK, book-keeping UK, bookkeeper UK


Article Body:
The Flat Rate Scheme was introduced as an easy way for small businesses to calculate their VAT liability.

The Flat Rate VAT scheme is available to businesses with a taxable turnover below £150,000 excluding VAT (also exempt and non-taxable sales should be below £37,500).

Under the flat rate scheme, you simply keep a percentage of the VAT charged to your customers. The percentage you keep varies depending upon which industry you are in.

You ignore VAT on your purchases, the VAT you pay simply becomes a cost. Eg If you spend £10 + VAT on stationery, the cost of that stationery becomes £11.75.

The flat rate scheme does allow you to reclaim the VAT on 'large' capital items - where you spend more than £2,000 you can reclaim the VAT on that item.

Should I be on the flat rate scheme?

As you claim a percentage of sales, those with higher sales stand to benefit more.

Those with low purchases (therefore paying little in reclaimable input tax) also stand to gain from the scheme.

For example A business with sales of £149,000 (excluding VAT) and in the category of "any other activity not listed elsewhere" - 10% flat rate and with negligible input VAT say £500 will save £8,068 per annum by switching to the Flat Rate VAT scheme.

To see how much you might save, try the  <A HREF="http://http://www.book-keeping.org.uk/external/vat-flat-rate.html/">Flat Rate VAT scheme calculator </A>

How do I join the Flat Rate VAT Scheme?

The easiest way is to call the VAT advice line on 0845 010 9000, who will be able to take your VAT registration number and relevant details on the telephone, following which you will be registered after approximately 21 days.

Alternatively, you can download the scheme application form from HMRC .

How do I decide which sector my business falls into?

If your business has sales in two or more sectors, you should apply the percentage appropriate to the main business activity, as measured by your sales.

Some sectors are clearer than others. The difference between "other business services" and "services not elsewhere specified" is far from clear. If you phone HM Revenue & Customs for guidance, make sure you keep a note of the name of the person you speak to and the date of the call.


