Businesses with a net turnover of less than £150,000 and who are VAT registered could increase profits by applying to join the VAT Flat Rate Scheme.
If the business has little or no input to offset against the output each quarter then this scheme would almost certainly increase profitability.
Rather than record all expenditure and claiming the input back, The Flat Rate Scheme requires only the income to be recorded, inclusive of the VAT charged at 20%, and then a designated fixed percentage taken of that gross income is paid over to HMRC each quarter. The fixed rate is designated based on the principal activity of the business.
Thus Bloggs & Co invoices £100,000 per year plus VAT at 20% giving a gross turnover of £120,000. It normally incurs Input tax of £1,500 pa, and thus pays VAT to HMRC of £18,500 pa. Bloggs & Co then joins the Flat Rate Scheme on the advice of his excellent accountant, and is designated a fixed rate of 14%.
The annual VAT Bloggs & Co then pays is £120,000 x 14% = £16,800. They have therefore increased profits by £1,700 as well as simplifying their bookkeeping!
If you think you might profit by joining the Flat Rate Scheme, contact me at tonymaber@mabersaccountancyservices.co.uk or 0844 846 9616.
I provide online accountancy services for owner/managed businesses which enables my clients to concentrate on their money earning work.
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