VAT Flat Rate: Pay Less Tax

The government brought in the VAT flat rate scheme to save on admin time for small VAT-registered companies. But there are also possible (if not probable) money savings to be had by signing up.

It’s worth mentioning now that - yes, while these tax breaks are only relevant to VAT registered companies - the savings are such that you might want to consider registering for VAT just to get them… Drop Moose a line directly to discuss if this might help you out…
Here are the basics of how it works.
Usually, VAT-registered companies pay VAT on certain purchases, and charge VAT on their sales. They declare these VAT transactions to HMRC every 3 months, and the difference between the two figures determines the amount which they’re reimbursed or charged.
With the VAT flat rate scheme, there’s no declaring to be done. You’re allocated a ‘flat rate’ (dependent upon your industry/specialism) that you pay to HMRC on your turnover. And although you’re charging 20% VAT to customers, you pocket the difference. You’re not able to reclaim the VAT on your purchases on the whole - but this usually still works out in your favour overall.
A quick example:
- Kate’s a VAT-registered freelance video editor.
- Over a 3 month period, she charges clients £12,000.
- Her allocated flat rate is 13%.
- So she’s charged £2,000 of VAT to customers (20% of the £12,000 charged)…
- …but she only has to pay back £1,560 to HMRC (13% of £12,000)
- So she’s saved £440 (less only the VAT she couldn’t reclaim from her expenses: very unlikely to be more than £100)…
It’s a tricky concept to get your head around fully, but pretty simple once you’ve got it and are seeing the savings. Get in touch if you’d like us to take you through how it’d work for your business.

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