1. Overview

Usually, how much VAT a business pays or claims back from HM Revenue & 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 and you must apply to HMRC.

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