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BUSINESS TIPS

VAT – Flat Rate Scheme

The VAT flat rate scheme is offered to small businesses as a way to simply their VAT affairs. Instead of attempting to calculate the difference between VAT on purchases and the VAT on sales, you simply pay the relevant flat rate percentage of your turnover to HMRC.

Whilst the scheme does simplify VAT considerably for businesses with a turnover of up to £150,000, there is also the potential for a real cash saving.  VAT is still charged at 20% in the normal way, but often the amount paid to HMRC is only 10 – 14%.  This difference can be kept by the business.  Often, this is greater than the VAT that the business would have suffered otherwise and therefore the flat rate scheme effectively generates a profit.  Even though the business will be subject to tax on this money, this can sometimes result in significant savings.

For more information, contact the tax team on 020 8429 9245.