10 things to watch out for on the VAT Flat Rate Scheme (FRS)
1) The £150k turnover threshold to join is VAT exclusive and taxable only but the £230k turnover threshold to leave is gross and includes exempt supplies;
2) Output tax is due on reduced-rate, zero-rated and exempt supplies under the scheme;
3) Output tax is due on zero-rated exports or EC removals;
4) The Box 6 scheme turnover is gross rather than net;
5) Limited cost businesses have to use 16.5% (tested on a period by period basis);
6) The reverse charge on services is dealt with completely outside the scheme;
7) If goods are brought in from the EU acquisition tax is due in Box 2 but there is no input tax claim in Box 4;
8) International services outside the scope of UK VAT are dealt with completely outside the scheme;
9) HMRC now allow retrospective adjustments to the FRS sector percentage;
10) Certain businesses historically using 14.5% can make refund claims based on 12% if they have used the wrong percentage.
Disclaimer:- The information contained herein is given by way of general guidance only and no action should be taken solely on the basis of the information contained herein. The Avanti Group (UK) Ltd will be pleased to provide further guidance on the issues, and how they might affect you. No liability is accepted by the firm for any action taken without seeking appropriate professional advice.