Are You Eligible For The VAT Flat Rate Scheme?

The VAT Flat Rate scheme is available to VAT registered businesses expecting their taxable turnover in the next 12 months to be £150,000 or less, excluding VAT. This turnover limit encompasses all sales that are not VAT exempt.

Under the scheme, businesses pay VAT as a fixed percentage of their turnover inclusive of VAT. The precise percentage varies based on the nature of the business. Newly registered businesses enjoy a special 1% discount in their first year of VAT registration.

However, certain conditions render a business ineligible for the scheme:

  • If you exited the scheme within the last 12 months.
  • If you were involved in a VAT offence, such as VAT evasion, within the last 12 months.
  • If you became part of (or were eligible to join) a VAT group within the last 24 months.
  • If you registered for VAT as a business division within the last 24 months.
  • If your business has close associations with another business.
  • If you have joined a margin or capital goods VAT scheme.
  • If you are utilizing the Cash Accounting Scheme.

Once enrolled in the scheme, you can typically continue using it as long as your total business income does not exceed, or is not expected to exceed, £230,000 (including VAT) within a 12-month period. You must also exit the scheme if you anticipate your income in the next 30 days alone to surpass £230,000 (including VAT). Special rules apply if the increased turnover is temporary.

If you believe that the scheme could benefit your business, please contact us, and we can assist you in evaluating your options.

Source: HM Revenue & Customs.

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