Flat Rate Scheme - calculating the amount due

I am completing my VAT return and I use the Flat Rate Scheme. Can you tell me how I calculate the VAT due to HMRC please?

1st July 2015

Firstly, you should remind yourself what industry you opted for when  you applied for the Flat Rate Scheme. The industry type dictates what rate you should apply. You can look up the rates on HMRC's website here https://www.gov.uk/vat-flat-rate-scheme/vat-flat-rates. 

In your first year as a VAT-registered business the rate is reduced by 1% until the day before your registration anniversary. 

You then apply this rate to your gross turnover - i.e. the amount you have invoiced your customers including the VAT. This means all of the following: 

  • the VAT inclusive sales and takings for standard rate, zero rate and reduced rate supplies 
  • the value of exempt income, such as any rent or lottery commission 
  • supplies of capital expenditure goods where you have reclaimed input tax on them. When they are sold out of the business, you must account for output tax at the appropriate VAT rate for the sale (not at the flat rate) 
  • the value of any despatches to other Member States of the EC if you are making intra EC supplies 

As exempt and zero rate supplies are included in your turnover under the Flat Rate Scheme, you may pay more VAT by being on the scheme if these supplies are a large proportion of your turnover. 

If you use the Flat Rate Scheme, you cannot normally recover any of the input VAT you incur on your expenses. The only exception to that is if you make a single purchase of capital expenditure where the value including VAT is £2,000 or more.  

If you would like any assistance in managing your VAT affairs, your local TaxAssist Accountant would be happy to help. Contact us if you would like to be put in touch with your local office. 

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here 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 information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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