Usually, how much VAT a business pays or claims back from HM Revenue and Customs (HMRC) is the difference between the VAT they charge customers and pay on their purchases.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT over to HMRC
- you keep the difference between what you charge your customers and pay over to HMRC
- you can’t reclaim the VAT on your purchases - except for certain capital assets over £2,000
To join the scheme your VAT turnover must be less than £150,000 (excluding VAT) and you must apply to HMRC.
Talk to an accountant or tax adviser if you want advice on whether the Flat Rate Scheme is right for you.