Flat rate scheme (FRS) ― overview

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note provides an overview of the flat rate scheme (FRS).

See also De Voil Indirect Tax Service V2.199B to V2.199D.

What is the flat rate scheme?

The flat rate scheme (FRS) is a special VAT scheme for small businesses. It is aimed at easing administrative complexity by removing the requirement to keep detailed input tax records. Instead (and in simple terms), a flat rate percentage is applied to a business’ VAT inclusive turnover to arrive at the amount of VAT due to HMRC. The applicable flat rate depends on the type of business that is operated.

For example, an accountant operating the FRS is likely to choose ‘accountancy or book-keeping’ as its type of business. The applicable flat rate percentage is 14.5%. If the accountant has a VAT inclusive turnover of £120,000, VAT due will be £17,400 (£120,000 x 14.5%). This figure for VAT due has been established without a need to consider VAT incurred on costs representing a significant simplification compared to normal VAT accounting.

There are various eligibility

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