Posted by Tax Innovations on 23 Apr 2012
VAT – Benefits of the Flat Rate Scheme
The VAT Flat Rate Scheme celebrated its tenth anniversary on 1 April 2012. The Scheme has produced time and tax savings for many small businesses.
The general principle of the scheme is that traders with taxable turnover of less than £150,000 do not reclaim input tax on purchases because the VAT paid is set at a fixed percentage of the VAT inclusive turnover depending on the trade category. However, scheme users can reclaim input VAT on the purchase of capital goods costing more than £2,000 including VAT. There is no relief for services costing more than £2,000.
Scheme users can reclaim pre-registration VAT on goods and services in exactly the same way as non-scheme members. It is therefore important to consider carefully the timing of the purchase of services (for example, the design and set-up of a website) because these will be recoverable if the service is purchased in the six months before registration but not if it is purchased after registration.
If you would like to discuss the benefits of operating the Flat Rate Scheme or the timing of major expenditure, please do not hesitate to contact us.
- Tax Relief For Residential Mortgages
- Property Partnership Incorporation and SDLT
- Overseas Pension Changes 6 April 2017
- Non-Resident CGT – April 2019 Changes
- UK Property Sales: Capital Gains Tax for Non-Residents