The flat rat VAT scheme...

If you earn above the VAT limit but allow a certain amount - I think it is around £150,000 turnover a year, then there is the option of two different VAT schemes.

There is of course the mainstream vat scheme but there is also what is called the flat rate vat scheme whereby you pay funnily enough a flat rate on all turnover no matter where it comes from: for instance it could come from overseas and from countries that don't pay vat.

What are your thoughts on this scheme for those of you who have looked into it and what are the relative pros and cons compared to choosing to go for the standard VAT scheme. I imagine this is a question that a lot of small businesses face when they have a relatively small turnover but above the very low VAT threshold.

Re : The flat rat VAT scheme

Obvious Pro - Less admin due to the fact that all you need to do is list sales invoices and take the requisite percentage from gross income. Remember, you can also claim back the VAT on any capital purchases over £2,000.

Obvious Con - You may pay more VAT than under the ordinary system if you have a lot of exempt or zero rated supplies as the requisite is on total gross supplies not just on standard-rated supplies.
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For efficient accounting services go to www.truemanbrown.co.uk

Re : The flat rat VAT scheme

Thanks very much Trueman, and generally I've read your messages in this forum with interest

Re : The flat rat VAT scheme

The flat rate scheme is worth considering if you supply services rather than goods and your VAT reclaimable business purchases are very low.
www.cramar.co.uk

Re : The flat rat VAT scheme

Always worth remembering is that the flat rate percentage is calculated against the gross amount of the invoice and not the net amount.

Therefore if your flat rate percentage is 10% and you invoice at standard rate for £100, the VAT payable will be 10% on £117.50 (£11.75) rather than £100 (£10). It can still be a very attractive option for many (as noted above) but not always as beneficial as HMRC would have you believe.
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kontracta.com - sole trader accountants.com - Colledge & Co, Chartered Accountants

Re : The flat rat VAT scheme

The flat rate scheme is good for businesses with a regulat turnover and very small outgoings

regards

Jeffrey Eow
http://www.factoringhelpline.co.uk
The UK Factoring & Invoice Discounting Helpline

Re : The flat rat VAT scheme

I suppose any way to reduce admin costs right?!
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B2B Business Directory | http://www.approvedbusiness.co.uk/

Re : The flat rat VAT scheme

Please remember that the flat rate scheme does not suit every business. Please do the calculations before you apply.

http://www.truemanbrown.co.uk/index.php?option=com_content&view=article&id=163 :vat-increases-to-20-what-should-i-do-&catid=46:blog&Itemid=185
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For efficient accounting services go to www.truemanbrown.co.uk

Re : The flat rat VAT scheme

Please remember that the flat rate scheme does not suit every business. Please do the calculations before you apply.

http://www.truemanbrown.co.uk/index.php?option=com_content&view=article&id=163 :vat-increases-to-20-what-should-i-do-&catid=46:blog&Itemid=185
__________________
For efficient accounting services go to www.truemanbrown.co.uk