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The Flat Rate Scheme was introduced as an easy way for small corporations 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 should be beneath 37,500).

Below the flat rate scheme, you just hold a percentage of the VAT charged to your buyers. The percentage you preserve varies depending upon which sector you are in.

You ignore VAT on your purchases, the VAT you pay merely 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 spend far more than two,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, these with higher sales stand to advantage far more.

These with low purchases (for that reason paying little in reclaimable input tax) also stand to achieve from the scheme.

For example A enterprise 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 significantly you may well save, attempt the Flat Rate VAT scheme calculator

How do I join the Flat Rate VAT Scheme?

The easiest way is to contact the VAT advice line on 0845 010 9000, who will be capable to take your VAT registration number and pertinent details on the telephone, following which you will be registered right after around 21 days.

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

How do I decide which sector my organization falls into?

If your business has sales in two or much more sectors, you should apply the percentage suitable to the major organization activity, as measured by your sales.

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