Quick Answer
Under the Flat Rate Scheme you charge customers the normal 20% but pay HMRC a lower fixed percentage of your gross turnover, keeping the difference. In exchange you…
Under the Flat Rate Scheme you charge customers the normal 20% but pay HMRC a lower fixed percentage of your gross turnover, keeping the difference. In exchange you generally cannot reclaim VAT on purchases apart from certain capital assets over £2,000.
It suits businesses with low costs relative to sales. If you buy a lot of standard-rated goods or services, ordinary VAT accounting is usually better. Watch out for the limited cost trader rate of 16.5%, which removes most of the benefit for service businesses with minimal purchases.
Was this helpful?
Still have questions? Ask our team →