A simplified ‘flat rate scheme’ is available for businesses with turnover of up to £150,000. You charge VAT as normal to your customers, but you don’t pay all the output tax to HMRC – you keep some instead of claiming input tax on most expenses. That saves the bother of separating out the VAT on your costs – and gets rid of a lot of reasons to fall foul of the VATman.
The amount of tax you have to pay depends on the type of business you are – some rates seem to be generous compared to the input VAT you are giving up, and some are less so. If your business qualifies, it’s at least worth doing some calculations, to see if it might save you money, time, or both.
If you have a buy-to-let property, that counts as a business for VAT purposes. Even though you don’t charge VAT to residential tenants, if you are registered for the FRS you may have to pay VAT to HMRC on your rental income.
If you are in any doubt whether the FRS is for you – whether you are currently using it or not – we’ll be happy to check.