Vat Schemes



You can join a VAT scheme if your business is registered for VAT, read our article to see how various schemes work and can be used by you.

Flat rate scheme

HMRC collects a fixed rate of VAT from you which is determined by the industry you are in. This allows businesses to keep the difference between the amounts paid to HMRC and the amount of VAT charged to the customers. You are able to claim standard VAT on certain capital assets over £ 2000. Your percentage is fixed and not dependent on your industry if you are a Limited Cost Business. You can see Flat Rate Percentages here.

Capital Good scheme

If you purchase or make an expensive capital asset, or already have one when you register for VAT the scheme allows you to spread the initial VAT claimed over a number of years. You can claim more if the proportion of taxable supplies increases and vice versa.

Annual scheme

You make one advance VAT payment towards your VAT bill rather than 4 quarterly payments, based on an estimate from last year and set-off any difference for more VAT required to be paid or apply for VAT refund when you submit your VAT return at VAT year end.

Margin scheme

This scheme relates to the purchase and sale of items such as antiques, second-hand goods, work of arts and any other collector`s items. The scheme taxes the difference between what you paid for an item and sold it for, rather than the full selling price. You pay VAT at 16.67% (one-sixth) of the difference.

Retail schemes

Point of sale scheme

Can be used if you identify the VAT rate for goods sold at the time of sale. Add all sales and divide by 6 (20/120) for standard or 21 (5/105) in case of 5% rated goods.

Apportionment scheme

Used when someone buys good only for resale. You cannot use apportionment for services or goods that you`ve grown yourself.

Direct calculation scheme

Can be used when you make a portion of your total sales from items that have a different VAT percentage and an only minority at a different VAT percentage. `

Clear House Accountants are specialist Accountants in London and VAT specialists. We work with clients helping them navigate around complicated VAT rules in the UK. Using SMART VAT planning schemes, we can help you save money and tax.

You might also want to read:

How to minimize capital gains tax when selling a Business?

Clear House VAT service

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