We will advise on the suitability of VAT registration, deal with the application on-line and complete quarterly returns.


VAT Flat Rate Scheme

Please note that in the 2002 Budget, Customs & HM Revenue introduced a scheme that is designed to simplify VAT for all businesses whose annual turnover does not exceed £150,000.

The Flat Rate percentage differs according to different trades. The percentage that is applicable to IT consultants is 12% in year one and 13% thereafter.

The scheme simplifies the accounting of VAT, by ignoring the VAT that you normally claim back on purchases, and instead implementing a system whereby a simple flat rate payment of VAT is made based on 13% of the company’s gross turnover i.e. including the VAT charged.

A simple example based on a quarters income of £16,250 (£65,000 per annum) is as follows:

Old scheme

> VAT due on Sales (i.e. 17.5% of income) £2,843.75
> VAT reclaimed on purchases (£125.00)
> VAT to be paid £2,718.75

New flat rate scheme

> VAT to be paid (£16,250 + £2,843.75) * 13% £2,482.18
 
In this example the saving is £236.57 per quarter or £946.28 per annum Please note that the greater the turnover, the larger the saving. In addition, if you buy capital assets, such as a PC, with a VAT inclusive value of £2,000 or more, you can still recover this VAT in the normal way.

We can review your VAT and make sure you are using the correct VAT scheme for your business.

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