VAT Flat Rate Scheme
1. Overview
Usually, how much VAT a business pays or claims back from HM Revenue & Customs (HMRC) is the difference between the VAT they charge customers and pay on their purchases.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT over to HMRC
- you keep the difference between what you charge your customers and pay over 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 less than £150,000 and you must apply to HMRC.
2. Join or leave the scheme
You must be eligible to join the scheme.
How to join
You can join the scheme:
- online - when you register for VAT
- by post - send a form VAT600 to HM Revenue & Customs (HMRC), the address is on the form
Download 'Form VAT600 FRS - Flat Rate Scheme application' (PDF, 65KB)
Download 'Form VAT600 AA/FRS - Joint application for Flat Rate and Annual Accounting schemes' (PDF, 85KB)
Confirmation you’ve joined the scheme is sent to your VAT online account (or in the post if you don’t apply online).
How to leave
You can leave the scheme at anytime, but you must leave if you’re no longer eligible to be in it.
To leave, write to HMRC and they will confirm when you can leave.
You must wait 12 months before you can rejoin the scheme.
HM Revenue & Customs
Imperial House
77 Victoria Street
Grimsby
Lincolnshire
DN31 1DB
3. Eligibility
You can join the Flat Rate Scheme if:
- you’re a VAT-registered business
- you expect your VAT taxable turnover to be less than £150,000 in the next 12 months
VAT taxable turnover is the total of everything sold that isn't VAT exempt.
Exceptions
You can't use the scheme if:
- you left the scheme in the last 12 months
- you committed a VAT offence in the last 12 months - eg VAT evasion
- you joined (or were eligible to join) a VAT group in the last 24 months
- you registered for VAT as a business division in the last 24 months
- your business is closely associated with another business
- you've joined a margin or capital goods VAT scheme
You can’t use the scheme with the Cash Accounting Scheme. Instead, the Flat Rate Scheme has its own cash-based method for calculating the turnover.
Leaving the scheme
You must leave the scheme if:
- you’re no longer eligible to be in it
- on the anniversary of joining, your turnover in the last 12 months was more than £230,000 - or you expect it to be in the next 12 months
- you expect your total income in the next 30 days alone to be more than £230,000
4. VAT flat rates
The rate is a percentage of your flat rate turnover. The actual rate depends on your business type. If the rate changes, you must apply the new rate from the date it changes.
In your first year as a VAT-registered business the rate is reduced by 1% until the day before your registration anniversary.
| Type of business | Current VAT flat rate (%) |
|---|---|
| Accountancy or book-keeping | 14.5 |
| Advertising | 11 |
| Agricultural services | 11 |
| Any other activity not listed elsewhere | 12 |
| Architect, civil and structural engineer or surveyor | 14.5 |
| Boarding or care of animals | 12 |
| Business services not listed elsewhere | 12 |
| Catering services including restaurants and takeaways | 12.5 |
| Computer and IT consultancy or data processing | 14.5 |
| Computer repair services | 10.5 |
| Entertainment or journalism | 12.5 |
| Estate agency or property management services | 12 |
| Farming or agriculture not listed elsewhere | 6.5 |
| Film, radio, television or video production | 13 |
| Financial services | 13.5 |
| Forestry or fishing | 10.5 |
| General building or construction services* | 9.5 |
| Hairdressing or other beauty treatment services | 13 |
| Hiring or renting goods | 9.5 |
| Hotel or accommodation | 10.5 |
| Investigation or security | 12 |
| Labour-only building or construction services* | 14.5 |
| Laundry or dry-cleaning services | 12 |
| Lawyer or legal services | 14.5 |
| Library, archive, museum or other cultural activity | 9.5 |
| Management consultancy | 14 |
| Manufacturing fabricated metal products | 10.5 |
| Manufacturing food | 9 |
| Manufacturing not listed elsewhere | 9.5 |
| Manufacturing yarn, textiles or clothing | 9 |
| Membership organisation | 8 |
| Mining or quarrying | 10 |
| Packaging | 9 |
| Photography | 11 |
| Post offices | 5 |
| Printing | 8.5 |
| Publishing | 11 |
| Pubs | 6.5 |
| Real estate activity not listed elsewhere | 14 |
| Repairing personal or household goods | 10 |
| Repairing vehicles | 8.5 |
| Retailing food, confectionary, tobacco, newspapers or children's clothing | 4 |
| Retailing pharmaceuticals, medical goods, cosmetics or toiletries | 8 |
| Retailing not listed elsewhere | 7.5 |
| Retailing vehicles or fuel | 6.5 |
| Secretarial services | 13 |
| Social work | 11 |
| Sport or recreation | 8.5 |
| Transport or storage, including couriers, freight, removals and taxis | 10 |
| Travel agency | 10.5 |
| Veterinary medicine | 11 |
| Waste or scrap dealing | 10.5 |
| Wholesaling agricultural products | 8 |
| Wholesaling food | 7.5 |
| Wholesaling not listed elsewhere | 8.5 |
*‘Labour-only building or construction services’ means building services where the value of the materials supplied is less than 10% of the turnover for those services. If more than this amount, the business is classed as ‘General building or construction services’.
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