HMRC created the flat rate scheme to help small businesses in the United Kingdom. It accomplishes this by easing the burden of dealing with VAT returns and enables you to calculate the VAT due by applying a fixed flat rate percentage to your total turnover. The flat rate percentage depends on the business sector within which the trader operates. Instead of paying the difference between the VAT you charge customers and the VAT you reclaim on business purchases, you can pay a fixed rate based on your total sales.

 To join the scheme your VAT turnover must be £150,000 or less (excluding VAT) in the next 12 months if you're a VAT-registered business.

You can't claim VAT back on things you buy if you use flat rates, with the exception of some capital assets worth more than £2,000, which you can.

Benefits of joining the scheme:

VAT collection is easier and more successful with the VAT flat rate scheme than with other sorts of taxes. This is usually determined by the industry you work in and the amount of VAT you pay on your expenses. The VAT Flat rate scheme is simple to operate and makes record-keeping simple because taxpayers don’t have to work out the VAT they can claim on their purchases.

Demerits of flat rate scheme:

Joining the scheme is likely to cost you more in VAT if you produce a lot of zero-rated sales or acquire a lot of standard-rated products and services. Businesses that are not on the Flat Rate System receive a quarterly refund from HMRC, which they would forfeit if they joined the scheme.

 How to join the scheme?

When you register for VAT, you can join the plan online. You just need to fill in VAT600 FRS form which you can either email or send it by post.

You get a 1% discount if you’re in your first year as a -registered business.

 Consider Cheylesmore charted accountants to know how flat rate will benefit your business.