What is flat rate VAT?

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If your VAT turnover is less than £150,000 when you start a business, you can choose to join the flat rate VAT scheme.

Once you’re registered for the flat rate VAT scheme, you must charge VAT on the goods and services you provide. Each quarter, when you submit your VAT return, you will need to pay a fixed rate of VAT back to HMRC. (The percentage you pay back depends on the type of business you run.)

The difference between the VAT you charge your customers (20%) and what you pay HMRC is yours to keep. Unlike the normal VAT scheme, you can’t reclaim VAT on your purchases under the flat rate VAT scheme – with the exception of certain capital assets over £2,000.

How to apply for flat rate VAT

You can apply for the flat fate VAT scheme online when you register for VAT. You can also download form VAT600, complete and return to HMRC (the address is on the form).

If you use an accountant they can help you decide if the flat rate VAT scheme is right for your company, and apply for you.

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