If you run a business you may well have to register for VAT at one point or another. If your turnover hits the current level for registration (this level can change according to the levels set by the current government) you have to register to pay it. Below this level you can register voluntarily.
There is also a flat rate scheme in place that is designed for business people who have a turnover of less than £150,000 per year. The idea of the scheme is to simplify the process of VAT accounting for those who have to complete it. We reveal more about the scheme below.
Our VAT calculator now includes flat rate percentages
The VAT calculator included on our website now has flat rates added to it. This means you can use it to see what rate of VAT you would pay and how much you will have to pay out of your turnover. It provides you with a quick and easy way to see where you would stand if you qualified to opt for the flat rate VAT process.
How does the flat rate VAT scheme differ from regular VAT payments?
In terms of charging VAT you can still charge the regular amount you normally would on your invoices to clients. However, you’ll pay VAT to HMRC at a much smaller percentage.
What are the percentage rates?
There are many different rates in place, currently ranging from 4% to 14.5%. The percentage that is relevant to your business will depend on the type of business you run. The HMRC website contains a full list of the different types of businesses that can join the scheme, and what the relevant flat rate VAT amount is in each case. You’ll find all the current flat rates ready to use in our VAT calculator for your convenience.
Would the scheme be of benefit to you?
It would be if you don’t tend to need many supplies for your business. For example, accountancy businesses and book-keeping services can pay a flat rate of 14.5% at present – a significant discount on the usual 20%. Packaging businesses pay even less under the scheme, at 9%. With the lowest rate coming at just 4% since 2011, you can see there are significant savings that can be made every year.
Are there any disadvantages?
If you tend to buy a lot of goods or supplies for your business that have 20% VAT added to them, you may not want to use the scheme. The benefits the scheme offers mean you won’t be able to claim VAT back in the normal way you would if you registered for VAT in the normal manner.
However, if you join the scheme you can still claim for capital goods if they total £2,000 or more. Take note though – you can only do this for purchases with a total exceeding this amount. For instance you couldn’t claim for two computers totalling £1,600 and a £500 printer if they were bought separately. However if you bought all the items together the invoice would total £2,100 and you could therefore claim back the VAT on the purchase.
It’s worth bearing this in mind before making the decision on whether to switch or not.
Use our calculator to see how the scheme could benefit you before you decide whether to join it or not
Our calculator makes life easy for you if you are considering whether or not to join the scheme. You could well find the scheme gives you an easier way to manage recording and paying for VAT, as well as making huge savings on the amount you’re paying at the moment.
As such you could be on the way to making some easy new profits thanks to the flat rate VAT scheme.