FAQ

Businesses in the UK that provide taxable goods or services and have an annual turnover exceeding the VAT registration threshold which is £85,000 must register for VAT. Check the latest information on the HMRC website.

The VAT Flat Rate Scheme is a simplified accounting scheme for small businesses, introduced by HMRC. Under this scheme, you pay VAT as a fixed percentage of your VAT inclusive turnover, rather than the difference between your input and output VAT. The percentage you pay depends on the type of business you run. Check the rate: HMRC website.

To join the VAT Flat Rate Scheme, your business must be a VAT-registered business in the UK and expect your VAT taxable turnover to be £150,000 or less (excluding VAT) in the next 12 months.

The main advantage of the Flat Rate Scheme is its simplicity. It can make it easier to manage your VAT and can save time. However, it may not be suitable for all businesses. For example, if you purchase a lot of goods and services and can claim a significant amount of input VAT, you might pay less VAT on the standard VAT scheme. It's advisable to consult with a tax advisor before deciding to join the scheme.

Yes, a business can leave the scheme at any time by notifying HMRC. Also, you must leave the scheme if you are no longer eligible to be in it. For example, if your VAT inclusive sales in the last 12 months were more than £230,000, you must leave the scheme.

A business is considered a "limited cost business" if its expenditure on relevant goods, including VAT, is either:Less than 2% of their VAT flat rate turnover in a prescribed accounting period. More than 2% of their VAT flat rate turnover but less than £1,000 per year if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000). Relevant goods are those used exclusively for the purpose of the business but exclude a number of items such as vehicles, vehicle parts and fuel (except where the business is one that carries out transport services - for example a taxi business - and uses its own or a leased vehicle), food or drink for consumption by the flat rate business or its employees, capital expenditure goods of any value, and goods for resale, leasing, letting or hiring out if your main business activity doesn't ordinarily consist of selling, leasing, letting or hiring out such goods. If your business is a "limited cost business", the flat rate percentage is set at 16.5%, regardless of the type of business. This high rate is to prevent businesses with low costs from gaining an advantage from using the Flat Rate Scheme.