From the course: Understanding UK Business Finance and Tax

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What are VAT schemes?

What are VAT schemes?

From the course: Understanding UK Business Finance and Tax

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What are VAT schemes?

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Did you know that there are a number of VAT schemes that allow businesses to account for VAT in different ways? These schemes are aimed mainly at smaller businesses to simplify the record-keeping process and reduce the admin burden of being VAT-registered. For example, the flat rate scheme allows businesses to add VAT on their sales invoices at the normal rate. However, they don't need to reclaim input VAT on purchases. Instead, they simply pay a predetermined flat percentage of their sales to the government depending on their industry. So, for example, in the accounting and bookkeeping industry, the government asks the business to pay 14.5% of its sales to HMRC to cover the VAT. It thinks the difference between output VAT and input VAT in this industry averages out to be 14.5%. The average for the food manufacturing industry would be 9%. The average in the sport and recreation industry would be 8.5%, and so on. At the time of recording in October 2023, businesses with estimated…

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