VAT Flat Rate Scheme – Work out Your Fixed Rate or Percentage of VAT

The term VAT Flat Rate Scheme means that you are charging flat rate VAT from your customers in a standard way, but at the same time, you are only paying a fixed percentage from your total sales to the HMRC department. However; if you are not considering this value-added tax flat rate scheme, then the amount you will pay to the HMRC for each quarter will be different from the amount you will charge from your customers, and the total amount of VAT be claimed on the supplier bills. There are also many downsides of this flat rate scheme such as you cannot reclaim the VAT once you start using this flat rate scheme.

It’s a great scheme designed to facilitate and support small businesses instead of helping them directly with a cash amount. This scheme will also ensure that the businesses will pay the same amount again for VAT without additional paperwork like other VAT schemes.

How Can I Use VAT Flat Rate Scheme?

Any small business can use the Flat Rate Scheme if it meets the following terms and conditions. Here are those following simple and straightforward terms that your business should comply with before applying for this scheme.

  • Your business must be VAT registered; otherwise, your application will be rejected.
  • Your business’s annual turnover should be under 150k Pounds, excluding the VAT Tax; otherwise, you cannot apply for it.

Moreover; you should also apply this Flat Rate VAT Scheme to the HMRC department directly. However; we will also recommend you to consult any tax expert or professional for a flat rate VAT return before joining so that he/she can guide you the best about which scheme will be best for you in the long run.

Click Here: VAT Calculator Ireland

Which Businesses Are Ineligible For Flat Rate VAT Scheme?

Even though we have briefly explained all the terms and conditions for joining the Flat Rate VAT Scheme above, however; still, some particular businesses cannot enter the VAT Scheme UK.

  • Those particular businesses that have recently left this scheme within the past year cannot join it again.
  • Those VAT registered businesses that have been subjected to any VAT violation in the past 12 months are also not eligible for this scheme.
  • Multiple businesses with close financial ties are also not allowed to join the vat scheme.

Benefits of Value-Added Tax Flat Rate Scheme in the UK

We have also tried our best to educate you with the most authentic information that you are looking for. Here are the following most noteworthy benefits that you will be able to get after joining this flat VAT scheme.

Cash Flow

We all know that small scale businesses have very limited resources to keep themselves operational for their customers. However; most small businesses experience a lot of difficulties while managing their cash flow, that’s why this vat flat rate scheme will help them to manage their cash flow more effectively. Paying different amounts every time to the HMRC department is not practically possible for many of the small businesses that are already struggling for cash flow. Keeping them straight to any specific amount will help them to manage their cash flow instead of taking huge loans for it on high-interest rates.

Low Fix Rates

The standard VAT rate is 20% in the UK right now; practically, this rate is too much for small businesses. Those particular businesses that are partnered with this flat rate scheme have to pay the lowest fixed rate for VAT instead of paying the standard rate, which only established businesses can afford to pay. If you have a small business in the UK and you haven’t joined this scheme yet, then you should quickly find any professional tax expert and consult with him as soon as possible.

Easy to Maintain Record

Paperwork and record-keeping of VAT schemes is, no doubt a very hectic process that involves a lot of difficulties and hassles. With the VAT Flat Rate, it’s much easier to maintain the VAT records of any business without making any additional efforts. Moreover; by joining this scheme, you will be able to focus more on growing your business instead of worrying about keeping the tax records up to date.

Flat Rate Scheme – Frequently Asked Questions

Can I reclaim VAT on the flat rate scheme?

No, you cannot reclaim the VAT once you start using this flat rate scheme unless you have any capital asset that worth more than 2k pounds. However; even in this condition, you have to pay the standard VAT on that asset first while selling it. In simple words, the VAT cannot be reclaimed again with this scheme.

How do I leave the VAT flat rate scheme?

There is no restriction or any sort of limitation that can decide about when you can leave this scheme. You can quit this flat rate scheme anytime by writing to the HMRC flat rate scheme department. The HMRC will contact you again after few days regarding your leaving date. However; once you have decided to leave this scheme, you cannot join it again within 12 months.

Is the VAT Flat Rate Scheme worthy of joining?

Yes, if you own any small businesses, then you must join this scheme which is specially designed to help small businesses to manage their cash flow and other financial matters more effectively.

Final Words – UK Flat Rate Scheme for Value-Added Tax

We hope you have now understood the whole concept behind this Value-Added Flat Rate Scheme and its benefits. However; calculating the total vat flat-rate amount for your business is a challenging task. You can use any trustworthy vat flat rate calculator for doing necessary calculations without making any error or mistake. We have also tried our level best to explain all the possible questions for this scheme that you might be wondering about. Don’t hesitate to contact us anytime for any possible queries.

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