VAT Calculator flat rate

What is the VAT Flat Rate Scheme?

In the flat rate scheme, businesses usually charge VAT to their consumers and pay VAT when they buy goods and services from the suppliers. But when we talk about VAT reclaim or paying VAT to HMRC, things get slightly different. You need to add up all sales, including the VAT you charged to customers minus the VAT you paid when purchasing services or goods.

After doing this, you pay a fixed VAT rate, which is the difference between what you charge to consumers and what you pay to HMRC. You can’t reclaim any VAT on your purchase until you purchase capital assets of over £2,000. The percentage you pay depends on your business type.

Percentages For VAT Flat Rate

When you register your business for VAT during the first year (it is not necessarily the same year you applied for a Flat Rate), you get a discount of 1% on a fixed percentage. If you have a business type for which you sell different types of goods, then you can choose a percentage that applies to total sales. The limited-cost trader would pay 16.5% rather than the trade’s percentage.

Eligibility Criteria For Flat Rate

If you are joining for VAT Flat Rate you must apply to HMRC and your business must meet following criteria.

  • If you rejoin, then you will have to wait at least one year.
  • Your business’s sales for next year must be under £150,000.
  • You can’t leave the scheme until your business reaches a yearly turnover of £230,000.

Advantages Of Flat Rate Scheme

  • This scheme makes record-keeping easier for you, and you don’t need to perform complex calculations.
  • It will save your energy and time and you can easily focus on your business and can easily expand it.
  • If you are registering for Flat Rate then you will get a discount of 1% until the day the day comes and you become VAT registered.
  • The percentage you pay to HMRC, so there is no uncertainty, and the cash flow is smooth.

Disadvantages Of the Flat Rate Scheme

  • The fixed-rate percentage doesn’t consider zero rate and VAT-exempt sales. In this way the VAT you pay will be higher and your revenue will be reduced.
  • If the VAT you paid in purchasing the raw material increased than the VAT you charged to consumers then you will not receive a VAT refund from HMRC.

NOTE: The Flat Rate Scheme is not advisable for all types of business. So visit the HMRC for further details.