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Topic: VAT

Flat rate scheme cover letter
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Flat rate scheme cover letter

Flat rate scheme cover letter

If your business is VAT registered, you could be eligible to use the flat rate scheme (FRS) to simplify your accounting. Use our letter to accompany your claim.

VAT reporting

The amount of VAT your business normally must account for to HMRC is the difference between the VAT it charges on its taxable supplies and the VAT it incurs on its purchases.

This means that detailed records of both supplies and purchases you make must be kept. In particular, in order to recover VAT on purchases (input tax), your business must hold a valid VAT invoice or alternative proof that VAT has been paid.

Flat rate scheme

The FRS is a simplified way of VAT reporting for smaller businesses. Instead of adding up all of the VAT you charge (output tax) and pay (input tax), the FRS only requires you to apply a flat rate percentage to your VAT-inclusive turnover and account for this to HMRC on your VAT return. There is no need to account for purchases, so the recordkeeping is more straightforward.

The percentage depends on exactly what your business activity is, but it will always be less than the standard rate. The lowest percentage is 4%, whereas the highest is 16.5%. The rates can be found at https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay.



You must apply to HMRC using Form VAT 600FRS before you can start using the scheme. If you are approved, you will usually be able to start to use the scheme from the beginning of the VAT period following the receipt of your application, although it is possible to request an earlier or later start date if you have a good reason. Note. You will still need to complete VAT returns, you just won’t be including any details of the input tax you have incurred.

Once you are operating the scheme, you are required by law to keep a record of your flat rate calculation each period, showing:

  • your flat rate turnover for the VAT accounting period
  • the flat rate percentage you have used
  • the tax calculated as due
  • the amount you spend on relevant goods.

Keep this with your VAT account in case it is requested for inspection.


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