VAT Flat rate scheme

Newsletter issue - May 2019.

The VAT flat rate scheme (FRS) is used by many small businesses to help simplify their VAT reporting obligations, although some VAT experts would argue that the scheme is not simple to use.

Broadly, the FRS is a simplified VAT accounting scheme for small businesses, which allows users to calculate VAT using a flat rate percentage by reference to their particular trade sector. When using the FRS, the business ignores VAT incurred on purchases when reporting VAT payable, with the exception of capital items which cost £2,000 or more. If the business incurs few expenses, and it operates in a sector with a relatively low FRS percentage, it will pay out less VAT to HMRC under the FRS than it would outside the scheme. Historically, many businesses have registered for VAT voluntarily before their turnover reached the VAT registration threshold, so they could make use of the cash advantage offered under the FRS.

Common percentages used by service-related businesses in recent years include:

Since 1 April 2017, a new 16.5% FRS rate has applied for businesses with limited costs (see below). Since the rate of 16.5% of gross turnover equates to 19.8% of the net, the result is that there will be almost no credit for VAT incurred on purchases.

A 'limited cost' business is defined as one whose VAT inclusive expenditure on goods is either:

'Goods' for these purposes must be used exclusively for the purpose of the business but exclude the following items:

(These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.)

Further information on the FRS can be found here.

Get a fixed quote

Fixed prices for agreed services

FAIR FEE POLICY. We believe you should always be in control of your fees with no surprises. You are entitled to a competitive fixed quote for agreed services, which is exactly what we charge, not a penny more. Most clients choose this option although if you prefer to pay an hourly rate we can arrange that too.

To receive a fixed quote for your specific circumstances either arrange a Free No Obligation Consultation or submit the form below. The form is designed for most of the routine accountancy services. If you require something more specialist, please contact us directly. If necessary we will contact you for further information.

If you are a new start up business, please use estimates. Full quotes are provided within 2 working days.

FIXED QUOTE REQUEST FORM »

Make more, keep more, work less

Get the right advice and take action

MAKE MORE

Have clear goals including long, medium and short term for what you want to achieve and develop a roadmap to get you there... read more »


KEEP MORE

Use our Tax Planning Service to ensure you don’t pay a penny more in tax than is necessary... read more »


WORK LESS

Work ON your business and not IN your business - work ON your systems so the systems run the business and your people run the systems, leaving you free to have more holidays... read more »

Start Up

Are you looking to start a new business?

Choose your business size to see how we can help you

Small

Key points for our small business clients to know

Choose your business size to see how we can help you

Medium

Help and assistance for medium sized businesses

Choose your business size to see how we can help you

Large

See our extensive range of services for your needs

Choose your business size to see how we can help you