The Taxman likes to encourage small businesses to join the flat rate VAT scheme. This scheme simplifies your VAT return as you apply the relevant flat percentage applicable for your trade sector to all your total business income each quarter, (including the VAT charged), and pay the resulting amount as VAT to the Taxman as VAT. You don't have to worry about reclaiming VAT charged on purchases.
However, the flat rate VAT scheme does not suit all small businesses. The flat rate must be applied to all business income, including interest received from business bank accounts, rents, and sales of assets where VAT was not reclaimed, such as cars or property. This means you effectively pay VAT on the gross receipts of sales on which you have not collected any VAT.
If you are a sole-trader the flat rate should be applied to any letting income you receive in your sole name, as lettings are regarded as a business for VAT purposes. Lettings undertaken as a partnership, perhaps jointly with your spouse, are not counted as part of your sole-trader business income. When you sell a let property the flat rate should be applied to the total proceeds. You can withdraw from the flat rate scheme before you sell a high value item such as a property, but you have to stay out of the scheme for at least 12 months.
If you would like to discuss the flat scheme in further detail, or if you would like us to check you are using the correct flat rate for your sector, please contact us on 0800 0988 144.
www.cheap-accountant.com
Cheap-Accountant.com is an innovative firm of Chartered Certified Accountants, and one of the UK's leading low-cost, fixed fee, tax and accountancy services.
You are right in what you have said above but the Flat Rate Scheme can still provide benefits to a number of businesses and should never be ruled out.
ReplyDeleteEmma Simpson // Cheap Accounting