Latest VAT FRS changes in % from 4/1/11

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FRS Application Form

Flat Rate Scheme Percentage Rates


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Normal scheme is where VAT is collected on company sales @ standard rate of VAT (currently 20%) and pay this across to the Customs & Excise less the VAT that your company has incurred on its expenses.

FRS (Flat Rate Scheme)is where VAT is collected on company sales @ standard rate of VAT but pay across to the Customs & Excise at a given rate on the gross turnover ie sales value + VAT (eg 14.5% for IT Consultants with reduction to 13.5% in the first year).There is no allowable deduction for input tax on expenditure (except for capital items over 2000).

The FRS aims to simplify VAT Accounting for small businesses. The scheme is available to most businesses whose taxable turnover (excluding VAT) is expected to be less than 150,000 in the next 12 months and total business income less than 187,500. The scheme can continue to be used until VAT inclusive annual turnover exceeds 225,000.

Whether or not to apply depends on the relationship to forecast Vatable income Vatable expenditure.

For example, with sales of 150k per year and vatable expenses of 8k per year, there is a saving of roughly 2,300 per year to operate the FRS.
With sales of 70k and vatable expenses of 8k per year, there is a saving of 220 per year.
With sales of 70k and vatable expenses of 4k per year, there is a saving of 1,020 per year.
With sales of 50k and vatable expenses of 4k per year, there is a saving of 500 per year.