You have to register for VAT if your turnover exceeds £81,000 in the past 12 months or is likely to exceed £81,000 in the next 30 days. If your turnover in the coming year is estimated to be £150,000 or less then you will be able to join the flat rate scheme.
In the flat rate scheme, VAT is charged as normal to customers. But the VAT paid to HMRC is calculated using a flat rate governed by a list on HMRC’s website. Input VAT must not be claimed unless it is in relation to capital asset purchases costing more than £2,000 or more (inclusive of VAT) in a single transaction.
As a management consultancy business, the flat rate is clearly stated at 14%. As you will be newly VAT-registered, you may also apply a 1% reduction to the flat rate percentage you apply during your first year of VAT registration only.
If the amount of input you could claim is not more than 6% of your turnover, it may therefore be viable to join the flat rate scheme. Furthermore, your bookkeeping burden is likely to reduce as you will not need to identify the input VAT to be recovered on your purchases.
Your local TaxAssist Accountant would be able to assist with registering your business for VAT or any of your other accounting or tax needs. Contact us to be put in touch with your local office.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. 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 forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.