What is the VAT Flat Rate Scheme?

The VAT Flat Rate Scheme is an alternative way for small businesses to work out how much VAT to pay to HMRC each quarter. With this scheme you pay a fixed rate of VAT to HMRC of your VAT inclusive turnover. The actual percentage you use depends on your type of business. Check here for the percentage.

You keep the difference between what you charge your customers and pay to HMRC but you can’t reclaim the VAT on your purchases - except for certain capital assets over £2000. To join the scheme your VAT turnover must be £150,000 or less (excluding VAT).