- The Flat Rate VAT Scheme simplifies VAT for small UK businesses by allowing them to pay a fixed percentage of their gross turnover instead of tracking VAT on every sale and expense.
- Businesses still charge customers the standard VAT rate but pay HMRC a lower, fixed rate, keeping the difference as part of their margin.
- Most VAT on purchases cannot be reclaimed under this scheme, except for capital goods over £2,000.
- Eligibility is limited to VAT-registered businesses with taxable turnover under £150,000, and there are restrictions for those in VAT groups, using other special schemes, or with compliance issues.
- The scheme reduces administrative burden but may not suit all businesses, especially those with high costs or who benefit from frequent VAT reclaims.
Source: stripe.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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