Don't ignore the savings under the Flat Rate Scheme

To start the New Year off I wanted to talk to everyone about the use of the Flat Rate Scheme, especially to those smaller businesses out there. My own personal reason for starting my year of 'VAT tips' off with this one is, despite my various attempts at advising my father of his need to stop feeding the pockets of HMRC and indeed implementing the flat rate scheme to save money, he has still to take stock and listen. I have decided that if my own family wish to ignore the wealth of free advice they gain from my position (I do hope the MD isn't reading this!), then there will certainly be other businesses out there that are willing to pick up on these free tips!

The Flat Rate Scheme is still one of my favourite schemes for the smaller businesses yet it still is not used enough. For those of you frightened of 'schemes' it really is one scheme which makes life much simpler. The basic idea is that you charge VAT in full on all your income, issuing invoices as normal (this will include exempt income too), but you only pay a set % over to HMRC (depending on your main line of business), thus simply pocketing the difference. The 1% first year discount is still available for those who are newly VAT registered thus making the scheme rather attractive for most small businesses. I would especially urge those who work from home and thus incur minimal input VAT to make sure they are on this scheme. I say this, as the other side to the scheme is that you are unable to recover any input VAT (apart from on certain capital items), but to this apparent downside, you pay a lot less to HMRC in the first instance and thus both your payments to HMRC and paperwork should decrease significantly! Now that is a scheme worth looking at........