The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
The flat rate scheme was introduced by HMRC to simplify VAT accounting for small businesses. Businesses using the scheme will apply a single VAT percentage to the businesses' relevant turnover during the period. The flat rate scheme is intended to reduce the administrative burden on small businesses because they are not required to record the VAT on sales and purchases in their accounting records.
The main point to note is the fact that businesses using the scheme will charge VAT at the applicable rate on all sales made but this is not paid to HMRC. The business cannot recover any VAT incurred on costs, unless the goods are capital expenditure items costing at least £2,000 including VAT. The business will apply the fixed rate percentage to the gross sales turnover and this amount is paid to HMRC as output VAT.
The main rules regarding the application of the scheme are outlined below.
These are the main advantages to using the scheme:
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