Error: Your upload path is not valid or does not exist: /home/jsrchart/public_html/wp-content/uploads VAT Archives - JSR Chartered Accountants

VAT Flat Rate Scheme – A Closer Look

Background:

The Flat Rate Scheme for VAT is a scheme specifically
designed by HMR&C to reduce the administrative burden on smaller VAT
registered businesses.  The scheme is
restricted to business whose turnover does not exceed a specified
threshold.  The scheme also excludes
businesses for a number of other reasons such as if the business has recently
been charged certain VAT penalties.

 

Application:

Under the Flat Rate Scheme the registered business charges
VAT at the standard rate/ applicable rate for the sale, however when it comes
to paying over the VAT liability to HMR&C the registered business
calculates its VAT liability at a specified “flat rate” based on the level of
sales.  The “flat rate” is a
pre-determined percentage that is list out by HMR&C, this flat rate varies
from trading activity, see the current table of rates at Appendix 1 below
(taken from www.hmrc.gov.uk ).

 

If your business operates within several of the business
areas listed it is necessary to select one rate, and this must be the rate that
best reflects the main or core business activity i.e. the area of your trading
activity that generates the greatest turnover.
This “flat rate” percentage would be applied to your total turnover.

 

The only VAT on acquisitions that can be recovered while a
business is registered under the Flat Rate Scheme is on capital additions
costing more that £2,000.

Turnover Thresholds for Registration:

A business can apply to register for the Flat Rate Scheme
provided the annual turnover is not expected to exceed £150,000 excluding
VAT.  Once your business is registered
on the Flat Rate Scheme the turnover excluding VAT can rise to more than
£230,000

First Year VAT Registration?

By way of a further incentive if in your first year of VAT
registration you enter the Flat Rate scheme then your business can benefit from
a 1% reduction to the appropriate flat rate.
This ‘introductory offer’ from HMR&C applies until the day before
the anniversary of your VAT registration, after which time you will be required
to revert to the standard Flat Rate for your business sector.

 

Record Keeping

It is essential that you keep a record of the calculations
to support your workings for each vat return and how your vat liability has
been arrived at.  You should as a
minimum keep a record of the sales applicable for the vat period, the “flat
rate” percentage you are applying and the resultant vat liability.

 

 

 

 

 

Appendix 1

Flat Rate Scheme percentage rates from 4 January 2011

These rates will apply from 4 January 2011 until further
notice.

Category of business Appropriate percentage
Accountancy
or book-keeping
14.5
Advertising 11
Agricultural
services
11
Any
other activity not listed elsewhere
12
Architect,
civil and structural engineer or surveyor
14.5
Boarding
or care of animals
12
Business
services that are not listed elsewhere
12
Catering
services including restaurants and takeaways
12.5
Computer
and IT consultancy or data processing
14.5
Computer
repair services
10.5
Dealing
in waste or scrap
10.5
Entertainment
or journalism
12.5
Estate
agency or property management services
12
Farming
or agriculture that is not listed elsewhere
6.5
Film,
radio, television or video production
13
Financial
services
13.5
Forestry
or fishing
10.5
General
building or construction services*
9.5
Hairdressing
or other beauty treatment services
13
Hiring
or renting goods
9.5
Hotel
or accommodation
10.5
Investigation
or security
12
Labour-only
building or construction services*
14.5
Laundry
or dry-cleaning services
12
Lawyer
or legal services
14.5
Library,
archive, museum or other cultural activity
9.5
Management
consultancy
14
Manufacturing
fabricated metal products
10.5
Manufacturing
food
9
Manufacturing
that is not listed elsewhere
9.5
Manufacturing
yarn, textiles or clothing
9
Membership
organisation
8
Mining
or quarrying
10
Packaging 9
Photography 11
Post
offices
5
Printing 8.5
Publishing 11
Pubs 6.5
Real
estate activity not listed elsewhere
14
Repairing
personal or household goods
10
Repairing
vehicles
8.5
Retailing
food, confectionary, tobacco, newspapers or children’s clothing
4
Retailing
pharmaceuticals, medical goods, cosmetics or toiletries
8
Retailing
that is not listed elsewhere
7.5
Retailing
vehicles or fuel
6.5
Secretarial
services
13
Social
work
11
Sport
or recreation
8.5
Transport
or storage, including couriers, freight, removals and taxis
10
Travel
agency
10.5
Veterinary
medicine
11
Wholesaling
agricultural products
8
Wholesaling
food
7.5
Wholesaling
that is not listed elsewhere
8.5