A section to help determine whether the Flat Rate VAT Scheme is right for your business. This guide explains the current flat rates of VAT, eligibility criteria, and thresholds.
FLAT RATE SCHEME: All VAT registered businesses report the amount of VAT paid on purchases and the amount charged to customers.
The difference in these amounts will either get paid to, or claimed from, HM Revenue and Customs. But, the VAT Flat Rate Scheme is different:
VAT turnover must be £150,000 or less, excluding VAT, for a company to join the scheme. All applications must be made to HM Revenue and Customs.
Note: Consult an accountant or tax adviser to find out if the Flat Rate VAT Scheme is right for your business.
You must check your company's eligibility before you apply to join. As a rule joining the scheme takes place:
HMRC will confirm that your application got accepted by post - if you did not apply online. Otherwise you will see the confirmation in your VAT online account.
If a company is no longer eligible they must leave the scheme. A business can leave the scheme at any time if they believe it is no longer beneficial for them.
HM Revenue and Customs
77 Victoria Street
Lincolnshire DN31 1DB
Write to HMRC telling them the company is leaving the scheme. They will then confirm a leaving date for you. If the company wants to rejoin the scheme they must wait twelve months after their leaving date.
To join the Flat Rate Scheme the company must be a VAT-registered business. The company's expected taxable turnover, excluding VAT, must also be £150,000 or less in the next year.
Note: The VAT taxable turnover relates to all goods and services sold - that are not tax exempt.
A business will not qualify for the scheme if:
The company cannot use the Cash Accounting Scheme with the Flat Rate Scheme. Use its own cash-based method to calculate the turnover in the Flat Rate Scheme. See 'section 9 of the VAT Notice 733'.
All businesses must leave the scheme any time:
Note: Check the process for working out flat rate percentages. There are periodic changes so you must use the most current proportions.
Flat Rate VAT Scheme for Small Businesses in the United Kingdom