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The Flat Rate Scheme was introduced as an simple way for little companies to calculate their VAT liability.

The Flat Rate VAT scheme is available to corporations with a taxable turnover beneath 150,000 excluding VAT (also exempt and non-taxable sales really should be below 37,500).

Beneath the flat rate scheme, you basically hold a percentage of the VAT charged to your consumers. The percentage you keep varies depending upon which business you are in.

You ignore VAT on your purchases, the VAT you pay just becomes a price. Eg If you devote ten + VAT on stationery, the cost of that stationery becomes 11.75.

The flat rate scheme does let you to reclaim the VAT on 'large' capital items - where you devote more than 2,000 you can reclaim the VAT on that item.

Ought to I be on the flat rate scheme?

As you claim a percentage of sales, those with higher sales stand to advantage far more.

These with low purchases (consequently paying small in reclaimable input tax) also stand to achieve from the scheme.

For example A organization with sales of 149,000 (excluding VAT) and in the category of "any other activity not listed elsewhere" - 10% flat rate and with negligible input VAT say 500 will save 8,068 per annum by switching to the Flat Rate VAT scheme.

To see how a lot you might save, try the Flat Rate VAT scheme calculator

How do I join the Flat Rate VAT Scheme?

The simplest way is to call the VAT advice line on 0845 010 9000, who will be able to take your VAT registration number and pertinent particulars on the telephone, following which you will be registered following approximately 21 days.

Alternatively, you can download the scheme application type from HMRC.

How do I decide which sector my enterprise falls into?

If your business has sales in two or much more sectors, you ought to apply the percentage proper to the main organization activity, as measured by your sales.

Some sectors are clearer than others. The difference between "other enterprise services" and "solutions not elsewhere specified" is far from clear. If you telephone HM Income & Customs for guidance, make confident you maintain a note of the name of the particular person you speak to and the date of the contact. ppi reclaim uk ppi claims letter ppi claims letter