The amount of VAT a business pays or claims back from HM Revenue and Customs (HMRC) is usually the difference between the VAT charged by the business to customers and the VAT the business pays on their own purchases.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT to HMRC
- you keep the difference between what you charge your customers and pay to HMRC
- you can’t reclaim the VAT on your purchases - except for certain capital assets over £2,000
To join the scheme your VAT turnover must be £150,000 or less (excluding VAT), and you must apply to HMRC.
You must be eligible to join the scheme.
How to join
You can join the scheme:
- online - when you register for VAT
- by post - fill in VAT600 FRS and send it to the address on the form (or useVAT600 AA/FRS to apply for the Annual Accounting Scheme at the same time)
You’ll get confirmation you’ve joined the scheme through your VAT online account (or in the post if you don’t apply online).
For eligibility, check out: https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay