Tax and Accounting

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Limited Company - VAT Flat Rate Scheme 

Contractors can make a profit from VAT!

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 contractor.

“VAT profit” of around £2k per annum is not unusual.

Ask us for a projection of how much “VAT profit” you could be making.

FRS Application Form 

FRS percentage rates