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Under the standard scheme for VAT you pay output VAT on your taxable sales and reclaim input VAT on your expenses, subject to any restrictions.

The Flat Rate Scheme is where you apply a fixed flat rate percentage to your gross sales and this is the amount of VAT that you pay to HMRC. The percentage you use will depend on what sector your business is in.

Under the Flat Rate Scheme, you do not reclaim back input VAT on any of your expenses. The only exception to this is if you spend £2,000 or more, including VAT on capital goods in one single transaction. In this situation you would include the input VAT in Box 4 on your VAT Return to be able to reclaim it. More information can be found here. The rules for reclaiming pre-registration input VAT still apply to those businesses on the flat rate scheme.

If you would like any advice or assistance in this area please contact us on 0800 0523 555 or use our simple online contact form to arrange a free initial consultation.

Date published 22 Nov 2021 | Last updated 30 Nov 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.


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