Wondering whether the Flat Rate Scheme would save you money — or cost you? Book a quick call and we'll run the numbers for your online business.
The VAT Flat Rate Scheme (FRS) is a simplified way of working out how much VAT you pay HMRC. Instead of adding up the VAT on every sale and subtracting the VAT on every purchase, you pay a single flat percentage of your gross (VAT-inclusive) turnover and keep the difference.
It sounds attractive, and for some small businesses it is. But changes to the rules — especially the "limited cost trader" category — mean it is now a poor fit for many ecommerce sellers. This guide explains how it works, who it suits, and how to tell whether it would actually save you money.
On the standard VAT scheme you charge 20% on sales, reclaim the VAT on your purchases, and pay HMRC the difference. The Flat Rate Scheme replaces that calculation with one simple step: