A guide to the Flat Rate VAT Scheme

If you are registered for VAT, you could benefit from registering for the Flat Rate VAT scheme. The scheme was set up by the government to reduce the cost of complying with VAT obligations.

The team at Futurelink Group are experts in payroll solutions and we help people just like you get to grips with VAT, National Insurance and much more. Please give us a call now on +44 (0)1923 277 900 and we will be happy to help find the right solution for you.

We have put together a jargon-free summary of the key points you need to know about VAT and the Flat Rate Scheme, including:

  • What is the Flat Rate VAT Scheme?
  • Who can register?
  • Calculating your flat rate percentage

What is the Flat Rate VAT Scheme?

The Flat Rate VAT Scheme enables you to charge your clients the standard rate of VAT at 20%, put pay back HMRC a recued percentage. Essentially this means that you can make a profit from charging your clients VAT. The percentage at which you pay VAT to HMRC depends on your category of business, we have put together a list of the different flat rate percentages at the bottom of this page so be sure to have a look and see how much you would need to pay back under the flat rate scheme.

It is also useful to remember that in your first year of VAT registration, you are able to reduce your flat rate by 1%. Let’s say for example that you are working as a dry-cleaner. The flat rate percentage is usually 12%, however in your first year this would be 11%.

To give you further insight into how the Flat Rate VAT Scheme works, we have put together the following example.

As a dry-cleaner in their first year of VAT registration you pay VAT back at a flat rate of 11%.

Let’s say you have a football team who you invoice on a monthly basis for cleaning their kit, you send them an invoice for £500 plus 20% VAT, so a total of £600.

You pay HMRC VAT back at a rate of 11% of the £600, so that means you pay HMRC £66 in VAT on this invoice. You charged the client £100 in VAT, which means you have made a profit of £44.

Who can register for the Flat Rate VAT Scheme?

You can register for the Flat Rate Scheme if you turnover £150,000 or less a year, excluding VAT.

Calculating your flat rate percentage

Featured below is a breakdown of the different flat rate percentages according to specific categories of business. The figures are accurate from 8th July 2014.

 

Category of Business Appropriate Percentage
Accountancy or bookkeeping 14.5
Advertising 11
Agricultural services 11
Any other activity not listed elsewhere 12
Architect, civil and structural engineer or surveyor 14.5
Boarding or care of animals 12
Business services that are not listed elsewhere 12
Catering services including restaurants and takeaways 12.5
Computer and IT consultancy or data processing 14.5
Computer repair services 10.5
Dealing in waste or scrap 10.5
Entertainment or journalism 12.5
Estate agent or property management services 12
Farming or agriculture that is not listed elsewhere 6.5
Film, radio, television or production 13
Financial services 13.5
Forestry or fishing 10.5
General building or construction services 9.5
Hairdressing or other beauty treatment services 13
Hiring or renting goods 9.5
Hotel or accommodation 10.5
Investigation or security 12
Labour-only building or construction services 14.5
Laundry or dry-cleaning services 12
Lawyer or legal services 14.5
Library, archive, museum or other cultural activity 9.5
Management consultancy 14
Manufacturing fabricated metal products 10.5
Manufacturing food 9
Manufacturing that is not listed elsewhere 9.5
Manufacturing yarn, textiles or clothing 9
Membership organisation 8
Mining or quarrying 10
Packaging 9
Photography 11
Post offices 5
Printing 8.5
Publishing 11
Pubs 6.5
Real estate activity not listed elsewhere 14
Repairing personal or household goods 10
Repairing vehicles 8.5
Retailing food, confectionary, tobacco, newspapers or children’s clothing 4
Retailing pharmaceuticals, medical goods, cosmetics or toiletries 8
Retailing that is not listed elsewhere 7.5
Retailing vehicles or fuel 6.5
Secretarial services 13
Social work 11
Sport or recreation 8.5
Transport or storage, including couriers, freight, removals and taxis 10
Travel agency 10.5
Veterinary medicine 11
Wholesaling agricultural products 8
Wholesaling food 7.5
Wholesaling that is not listed elsewhere 8.5

At Futurelink Group, we provide a number of comprehensive solutions to cover as much or as little of your payroll needs that you require. For more information, please call our friendly customer care team on +44 (0)1923 277 900 and they will be happy to find the right solution for you.

“I’ll most certainly pass on your details to people I know. You run a great service there, keep up the good work.”

William Cadden, Self-Employed Contractor

“For me, Futurelink Group was the best solution, as a foreign and a lack of knowledge of the UK rules, they were extremely helpful in all aspects. Always fast in answering all my questions. I almost didn’t do anything and they put me on track to invoice and receive my payments. I can fully recommend them.”

Ronaldo, Umbrella PAYE contractor

“WS Contractors Ltd are extremely happy with the services that Futurelink provide. The efficient and friendly staff are always willing to help and assist. The feedback from our operatives is positive and pleasing. We would recommend Futurelink to all new recruits joining our team.”

Michelle Hughes, WS Contractors Ltd

“We at Gemini would like to thank you and your team for all your help and support in connection to payroll solutions. We find Futurelink Groups approach to be responsive to action when required with a courteous and bright manner – keep up the good work!”

Frank Mcfarlane, Gemini Security Services Ltd

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