Latest – VAT FRS changes in % from 4/1/11
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Flat Rate Scheme Percentage Rates
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Normal scheme is where VAT is collected on company sales @ standard rate of VAT (currently 20%) and pay this across to the Customs & Excise less the VAT that your company has incurred on its expenses.
FRS (Flat Rate Scheme)is where VAT is collected on company sales @ standard rate of VAT but pay across to the Customs & Excise at a given rate on the gross turnover ie sales value + VAT (eg 14.5% for IT Consultants with reduction to 13.5% in the first year).There is no allowable deduction for input tax on expenditure (except for capital items over £2000).
The FRS aims to simplify VAT Accounting for small businesses. The scheme is available to most businesses whose taxable turnover (excluding VAT) is expected to be less than £150,000 in the next 12 months and total business income less than £187,500. The scheme can continue to be used until VAT inclusive annual turnover exceeds £225,000.
Whether or not to apply depends on the relationship to forecast Vatable income Vatable expenditure.
For example, with sales of £150k per year and vatable expenses of £8k per year, there is a saving of roughly £2,300 per year to operate the FRS.
With sales of £70k and vatable expenses of £8k per year, there is a saving of £220 per year.
With sales of £70k and vatable expenses of £4k per year, there is a saving of £1,020 per year.
With sales of £50k and vatable expenses of £4k per year, there is a saving of £500 per year.