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HMRC internal manual

VAT Flat Rate Scheme

Leaving the scheme: Why is the leaving test tax inclusive?

The leaving test is tax inclusive as a simplification. Because the flat rate user is calculating VAT on gross income rather than a net value plus VAT, the test is expressed in terms of a VAT inclusive figure as this should be most readily to hand. It also includes any exempt income.

Note: this differs from the joining test and from the turnover tests in other schemes.