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Flat rate VAT Scheme

Flat rate VAT Scheme

The flat rate VAT Scheme is a simplified way for small businesses to comply with their VAT obligations.

Usually the amount of VAT a business needs to pay to HMRC is the difference between the VAT charged on their Sales and the VAT paid on their purchases.

You can join the flat rate scheme if your turnover is £150,000 or less (excluding VAT).

To join, you need to apply with HMRC. You can apply online or by completing HMRC for VAT600FRS and posting it to HMRC.

You will receive a confirmation from HMRC confirming you have joined the scheme.

You can choose to leave the scheme at any time and you must leave if your turnover in the last 12 months, at any point, exceeds £230,000.

The flat rate you can use depends on your business category, see below:


Type of business

Current VAT flat rate (%)

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 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

Entertainment or journalism

12.5

Estate agency or property management services

12

Farming or agriculture 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 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, confectionery, tobacco, newspapers or children’s clothing

4

Retailing pharmaceuticals, medical goods, cosmetics or toiletries

8

Retailing 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 not listed elsewhere

8.5

* ‘Labour-only building or construction services’ means building services where the value of the materials supplied is less than 10% of the turnover for those services. If more than this amount, the business is classed as ‘General building or construction services’.
From April 2017, new rules are being introduced.

You will be classed as a “limited cost business” if your goods cost less than either:

  • 2% of your turnover
  • £1,000 a year (if your costs are more than 2%)

Do note that not all costs are included when calculating the 2%, and you may want to speak to your accountant or financial advisor to ensure you know what costs can be included.
This means you’ll pay the higher rate of 16.5%.

The flat rate scheme saves time by removing the need to individually records all purchase VAT.

The flat scheme is a far quicker and often cheaper option for businesses who don’t have the time, or inclination to file VAT under the standard approach, however it can be more costly if you make exempt supplies as flat rate vat is payable on ALL supplies made, including exempt supplies.