What is the flat rate for VAT? Does it mean that a company can retain some of the VAT paid to it by clients?

Question

In other words retaining a percentage of the VAT paid by clients and passing a percentage onto the State?

Answer 1

Yes it does, but the amount may be very small.

It depends on the rate applicable for your business.

The downside is that you don't claim VAT on inputs, and if they are higher than other similar businesses you could lose out.

But it does save an awful lot of admin time.

Answer 2

Hi,

I'm assuming that you mean the Flat Rate Scheme that HMRC allow certain trade sectors to operate for their VAT account.  Depending on the type of business you conduct, you may be eligible to use this scheme.  This means for example that if your business falls within the 10% rate then you would pay 10% of all your income to HMRC as VAT.  But as the previous poster also advised, you are then blocked from claiming any VAT incurred in expenses, purchases etc.  You will have to analysis your last few VAT returns and decide if this system would be more beneficial to your business i.e. are your level of inputs low enough for you to 'take the hit'?  And yes, although you would still charge your customers the rate of 17.5%, you would only pass on 10% of VAT collected to HMRC.  Have a look at the HMRC website and download the Public Notice relating to the Flat Rate Scheme as this details what rates would be applicable to which business sector.

Hope this helps

Answer 3

VAT in the UK is 17.5% and is fully payable to the state.

A company has to pay it on any goods that it purchases and then sells on. It is liable to pay the full amount to the government that the customer pays but is able to cliam back 100% of the goods is purchases.