Usually, how much VAT a business pays or claims back from HM Revenue and Customs (HMRC) is the difference between the VAT they charge customers and pay on their purchases. However if your business has minimal expenditure then there is a VAT scheme that will benefit you.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT over to HMRC dependant on the type of business which can be as little as say 8.5% with a 1% discount in the first year
- 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 (excluding VAT) and you must apply to HMRC.
Talk to us if you want advice on whether the Flat Rate Scheme is right for you.