...I hear you cry...
We are lucky enough here at Enterprise North East Trust to have Business Advisors delivering Business Gateway services, who come from a wide variety of backgrounds.
Some of our advisors have worked in finance or banking, some having run their own business, and some in the world of Accountancy. It's these wide ranging skills that means if you call 01224 289745 there is likely to be someone who can help with your query - whatever it might be.
Business Advisor, Liz Pirrie is no exception to this rule - Liz comes from an Accountancy background, and has a wealth of experience in helping small businesses.
Liz has taken some time out of her busy day to give us a brief overview of what the Flat Rate VAT scheme is, since so many of our clients have queries on this area.
The Flat Rate VAT Scheme (FRVS) is a simplified scheme for accounting for VAT for small businesses.
You are eligible to join the flat rate scheme if your annual turnover (before VAT) is less than £150,000. Once you have joined the scheme, you can stay in it until your turnover reaches £230,000.
Unlike the standard scheme where you have to account for VAT on all your purchases, with the flat rate scheme you pay VAT to HMRC based on a fixed percentage of your VAT inclusive turnover. This is best demonstrated by the following example:-
The actual percentage you pay varies depending on the industry you are in (Hairdressing is 13% for example, and Legal services is 14.5%).
HMRC produces a table of flat rate percentages. In the first year of VAT registration you get a 1% discount on your industry rate.
The main advantage of using the flat rate scheme is that it simplifies your bookkeeping. If you buy a lot of goods that don’t have VAT on them, for example, if a lot of your suppliers are not VAT registered, there can be a financial advantage to being on the flat rate scheme.
On the other had, if everything you buy is standard rated, you are probably better being on the standard scheme.
If you buy capital items (such as a computer, photocopier, shelving etc) that cost £2,000 or more (inclusive of VAT) you may be able to claim the VAT back on them. This must be items that you will keep in the business for more than a year.
There are special rules relating to the flat rate scheme for florists, farmers and barristers.
You can find more information on the flat rate scheme here… HMRC Flat Rate VAT Info
You should always seek advice from your accountant regarding the most appropriate scheme for you.
If there's anything specifically that you would like to see a blog on please let us know via email - and we'll be happy to help.
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