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Flat Rate VAT Scheme - An Overview | |
Please note that following the Pre-Budget Report 2008 on 24/11/2008, calculations to the Flat Rate VAT Scheme have changed. The fixed rate percentages for many business types will have changed. You can view the new percentages in Annex E of this HMRC PDF document.
Alongside the standard VAT rules, some small businesses may be better off by operating within the flat rate VAT scheme which has been running since 2002.
The main aim of the flat rate scheme is to reduce the cost of complying with VAT obligations by simplifying the way small businesses calculate their VAT.
In essence, instead of paying Customs the total VAT charged on invoices minus any input VAT you may reclaim, you charge a fixed percentage of your gross turnover and pay that amount to Customs each year.
The fixed rate VAT percentage varies according to the type of business you run; a travel agency would pay 9%, whereas an accountant or IT consultancy would pay 13%.
Notes related to the Flat VAT Scheme
Full details of the applicable rates, together with full guidance and application forms can be found here. Please note that the flat rate percentages (by industry) were changed in the Pre-Budget Report 2008. The new rates can be found in Annex E of this HMRC document.
Posted August 13, 2008

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