VAT Flat Rate Scheme

• If your VAT taxable turnover is less than £150,000, you could simplify your VAT accounting by calculating your VAT payments as a percentage of your total VAT-inclusive turnover.

 

• Although you cannot reclaim VAT on purchases - it is taken into account in calculating the flat rate percentage - the Flat Rate Scheme can reduce the time that you need to spend on accounting for and working out your VAT.

• Even though you still need to show a VAT amount on each sales invoice, you don't need to record how much VAT you charge on every sale in your accounts. Nor do you need to record the VAT you pay on every purchase.

 

• If you register for the Flat Rate Scheme in your first year of VAT registration, you can take advantage of a one per cent reduction in your flat rate percentage.

 

Illustration 1

• Mr Singh has just commenced trading as a management consultant and operates through his Limited Company - Singh Consultancy Limited.

 

• His turnover in the next 12 months is anticipated to be £100,000.

• He has registered for VAT on the flat rate scheme. His flat rate percentage is 14% (with a 1% discount in year 1).

 

His annual VAT account would be as follows:

Net invoices to customers	£100,000
Plus VAT @ 20%	£20,000
Total amount received	£120,000
VAT payable to HMRC	£120,000 @ 13% = £15,600
Potential profit on Flat Rate Scheme	£4,400

 

Call: 0151 644 4848
Email: lee@lbwaccountants.co.uk
          gary@lbwaccountants.co.uk

"If you register for the Flat Rate Scheme in your first year of VAT registration, you can take advantage of a one per cent reduction in your flat rate percentage."