The Flat Rate Scheme (FRS) was introduced to simplify VAT accounting for small
businesses. The FRS works particularly well for contractors and consultants as they tend to have a high ratio of
turnover to expenses.
When you apply to join FRS you are given the applicable VAT % rate for your industry
sector be it IT, Oil and Gas, or other. Typically this will be between 11% - 14.5%. HMRC even give you a 1% year
1 discount! You then account for VAT on your GROSS turnover. This often means you are receiving more VAT from
your customer than you are paying over to HMRC – it is a great idea! Unfortunately you can no longer reclaim VAT
on purchases and expenses (except capital items over £2000) however this figure is often immaterial for a
“VAT profit” of around £2k per annum is not unusual.
Ask us for a projection of how much “VAT profit” you could be making.