Flat Rate VAT an uphill struggle?
...RIFT Accounting levels the playing field
Buckle up, adventurers. Today we're talking about Flat Rate VAT, and the ride's about to get bumpy!
VAT is among the thorniest undergrowth most business explorers encounter in their journeys, and it's easy to see why so many get tangled up in its roots. For Big Business it's a headache at best, but for smaller companies, freelancers and contractors it can be outright, man-eating monster.
Part incentive scheme and part cryptic crossword with no clues, the Flat Rate Scheme (FRS) is HMRC's way of encouraging more businesses to sign up for VAT (even if they don't have to). At its simplest, it's a way of cutting down on the paperwork involved in working with VAT, but it's still a source of confusion and uncertainty for many.
Here's how it works: once you're registered for FRS, you charge normal VAT to your customers (business and non-business), but you pay a only part of that on to HMRC - at a rate dependent on the type of business you're running. Whatever's left over, you can keep to count against the VAT you'd otherwise have to claim back on your business expenses.
In theory at least, it gets you out from under the shadow of a lot of your VAT paperwork, so it's popular with freelancers and businesses that don't make a lot of business purchases. Of course, you still have to turn in your regular VAT returns, but at least it's a little easier - and HMRC's hoping businesses that otherwise wouldn't register for VAT will sign up for FRS.
Let's look at some of the pros and cons of the scheme:
So, you've looked into it and want to see what FRS has to offer. Here's what it takes to qualify:
Once you've signed up for FRS you can stay in it until your total business income tops £230,000. It's worth noting that, if you've made a large enough business purchase that the VAT you've collected doesn't cover what you've paid on it, you may be able to make a separate VAT claim about that alongside your FRS return.
Most importantly, always remember that RIFT Accounting takes care of all your VAT hassles as part of our service. Send up a flare and we'll chart you a course through the murkiest depths of the HMRC swamp - and check back here for more Voices from the RIFT.