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VAT Flat Rate Scheme

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Sunday 15th December 2019 No Comments »
VAT Flat Rate Scheme

Overview

Usually, how much VAT a business pays or claims back from HM Revenue & Customs (HMRC) is the difference between the VAT they charge customers and pay on their purchases.

With the Flat Rate Scheme:

  • You pay a fixed rate of VAT over to HMRC
  • You keep the difference between what you charge your customers and pay over to HMRC
  • You can’t reclaim the VAT on your purchases – except for certain capital assets over £2,000

To join the scheme your VAT turnover must be less than £150,000 and you must apply to HMRC.

Join or leave the scheme

How to join

You can join the scheme:

  • Online – when you register for VAT
  • By post – send a form VAT600 to HM Revenue & Customs (HMRC), the address is on the form

Confirmation you’ve joined the scheme is sent to your VAT online account (or in the post if you don’t apply online).

How to leave

You can leave the scheme at anytime, but you must leave if you’re no longer eligible to be in it. To leave, write to HMRC and they will confirm when you can leave.

You must wait 12 months before you can rejoin the scheme.

HM Revenue & Customs
Imperial House
77 Victoria Street
Grimsby
Lincolnshire
DN31 1DB

Eligibility

You can join the Flat Rate Scheme if:

  • You’re a VAT-registered business
  • You expect your VAT taxable turnover to be less than £150,000 in the next 12 months

VAT taxable turnover is the total of everything sold that isn’t VAT exempt.

Exceptions

You can’t use the scheme if:

  • You left the scheme in the last 12 months
  • You committed a VAT offence in the last 12 months – eg VAT evasion
  • You joined (or were eligible to join) a VAT group in the last 24 months
  • You registered for VAT as a business division in the last 24 months
  • Your business is closely associated with another business
  • You’ve joined a margin or capital goods VAT scheme

You can’t use the scheme with the Cash Accounting Scheme. Instead, the Flat Rate Scheme has its own cash-based method for calculating the turnover.

Leaving the scheme

You must leave the scheme if:

  • You’re no longer eligible to be in it
  • On the anniversary of joining, your turnover in the last 12 months was more than £230,000 – or you expect it to be in the next 12 months
  • You expect your total income in the next 30 days alone to be more than £230,000

VAT flat rates

The rate is a percentage of your flat rate turnover. The actual rate depends on your business type. If the rate changes, you must apply the new rate from the date it changes.

In your first year as a VAT-registered business the rate is reduced by 1% until the day before your registration anniversary.

Type of business Current VATflat rate (%)
Accountancy or book-keeping 14.5
Advertising 11
Agricultural services 11
Any other activity not listed elsewhere 12
Architect, civil and structural engineer or surveyor 14.5
Boarding or care of animals 12
Business services not listed elsewhere 12
Catering services including restaurants and takeaways 12.5
Computer and IT consultancy or data processing 14.5
Computer repair services 10.5
Entertainment or journalism 12.5
Estate agency or property management services 12
Farming or agriculture not listed elsewhere 6.5
Film, radio, television or video production 13
Financial services 13.5
Forestry or fishing 10.5
General building or construction services* 9.5
Hairdressing or other beauty treatment services 13
Hiring or renting goods 9.5
Hotel or accommodation 10.5
Investigation or security 12
Labour-only building or construction services* 14.5
Laundry or dry-cleaning services 12
Lawyer or legal services 14.5
Library, archive, museum or other cultural activity 9.5
Management consultancy 14
Manufacturing fabricated metal products 10.5
Manufacturing food 9
Manufacturing not listed elsewhere 9.5
Manufacturing yarn, textiles or clothing 9
Membership organisation 8
Mining or quarrying 10
Packaging 9
Photography 11
Post offices 5
Printing 8.5
Publishing 11
Pubs 6.5
Real estate activity not listed elsewhere 14
Repairing personal or household goods 10
Repairing vehicles 8.5
Retailing food, confectionary, tobacco, newspapers or children’s clothing 4
Retailing pharmaceuticals, medical goods, cosmetics or toiletries 8
Retailing not listed elsewhere 7.5
Retailing vehicles or fuel 6.5
Secretarial services 13
Social work 11
Sport or recreation 8.5
Transport or storage, including couriers, freight, removals and taxis 10
Travel agency 10.5
Veterinary medicine 11
Waste or scrap dealing 10.5
Wholesaling agricultural products 8
Wholesaling food 7.5
Wholesaling not listed elsewhere 8.5

*’Labour-only building or construction services’ means building services where the value of the materials supplied is less than 10% of the turnover for those services. If more than this amount, the business is classed as ‘General building or construction services’.

VAT Helpline

0845 010 9000
Monday to Friday, 8am to 6pm

At Bizorb we aim to provide the most accurate and up to date information to you. This article contains public sector information licensed under the Open Government Licence v1.0. If you spot any errors in this article please let us know.

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