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. When using the scheme, input tax (including VAT on imports / acquisitions from the EU for NI businesses) is not recovered. This is because the flat rates are calculated to represent the net VAT payable to HMRC. This means an allowance for input tax is built into the flat rates.

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

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