Commentary

V7.333 Zero-rated supplies and schemes for small businesses

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.333 Zero-rated supplies and schemes for small businesses

Part V7 Tax planning | Commentary

V7.333 Zero-rated supplies and schemes for small businesses

Flat rate scheme

The flat rate scheme is available for use by a small business with taxable turnover of £150,000 per year or less (VAT exclusive) at the time of joining the scheme. The basic aim of the scheme is that a business does not reclaim input tax on its costs, but just applies a flat-rate percentage calculation to its VAT inclusive sales, and this is the amount of VAT that will be paid each quarter. The flat rate percentage depends on the trade category of the business.

For a business that wholly makes zero-rated supplies, there will be no benefit in using the flat rate scheme. This is because there is no flat rate category that has a 0% rate – and even if there was a 0% rate, this would be a negative result anyway because the business would benefit from input tax recovery.

However, where the flat rate scheme may

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