What is The Flat Rate VAT Scheme?

If you are searching for the Flat rate VAT scheme for your business, then make sure that your business taxable turnover is less than £150,000. The major advantage of this scheme is that it saves your times for calculating tax and managing accounts.

Basically, paid VAT to HMRC is the VAT you charge minus VAT you pay. When you use the FLAT RATE SCHEME, you pay a fixed amount VAT tax calculated by a specific percentage. This percentage varies from business to business and it smoothens the flow of cash and also saves time.

With VAT scheme, you get rid of saving record on each sale and purchases. This saves a lot of your time and allows you to spend this time on the development of your business. But you need to verify the invoices as you do in the normal business account.

In the first year of the registration, you get a 1% discount on the flat scheme. You have no need to separately work on the VAT purchases and claiming. There are also fewer chances of mistakes on it with full knowledge of payments to HMRC.

There are some disadvantage of the Flat Rate Scheme

When the percentage is calculated then it involves zero-rated account and exempt sales. It also involves the allowance on the VAT that you spend on the sales. There may be 3 reasons under which the Flat scheme will not be feasible for your business. These are as follow:

  1. Standard-rated items purchases, mostly. 
  2. Under VAT accounting you collect the VAT repayment on regular basis.
  3. Excess of zero-rated or exempts purchases.

Please talk with accountant of HMRC, if you need any support.