VAT Flat Rate Scheme

Usually, how much VAT a business pays or claims back from HM Revenue and Customs (HMRC) is the difference between the VAT they charge customers and pay on their purchases.

However with the Flat Rate Scheme you only pay a fixed rate of VAT to HMRC. You can join the scheme if your annual taxable turnover (excluding VAT) will be £150,000 or less; and your annual total turnover (including VAT) will be £187,500 or less.

The VAT rate you pay under the VAT Flat Rate Scheme is determined by what industry you fall under. The below graphic demonstrates an example of someone working within a Labour-only building or construction services industry at a tax rate of 14.5%.

Please see the table below to establish what tax percentage you fall under within your industry under the FRS scheme. An extra benefit is that, during the first year your business joins the scheme, the flat rate percentage you apply is reduced by 1%.

VAT Flat Rate Scheme Industry Table.

Here at Elite Financial accounting we often recommend a VAT Flat Rate Scheme can we extremely beneficial to your limited company for tax savings. Read a free guide on this here.

Other Benefits Using a VAT FRS?

The Flat Rate VAT scheme was introduced in 2002 and is available to all small businesses or sole proprietorships. Companies with low purchases and expenses can often achieve a financial saving and it can also help to simplify VAT calculations and record keeping removing the need to keep a record of VAT charged for each individual sale or that paid on purchases.