Flat Rate Scheme

Question 1

VAT liability =

Answer 1

x% times total gross taxable turnover

Question 2

percentage set by

Answer 2

HMRC according to business sector, ranging from 4% to 14.5 %

Question 3

special rate

Answer 3

of 16.5% for certain “limited cost” businesses

Question 4

No input tax claim

Answer 4

for VAT on purchases

Question 5

dont have to

Answer 5

separately record input and output VAT

Question 6

business still

Answer 6

charges customers VAT at normal rate on base cost

Question 7

only for

Answer 7

small businesses (taxable turnover up to £150k)

Question 8

Advantage 1

Answer 8

• reduced administration requirements regarding detailed records for input VAT (on expenses)

Question 9

Advantage 2

Answer 9

the VAT paid to HMRC is less than the VAT charged to customers, thereby generating a financial advantage

Question 10

advantage 3

Answer 10

beneficial to small businesses with minimal input VAT on expenses

Question 11

disadvantage 1

Answer 11

confusion and error may arise with the different standard VAT rates and industry or sector VAT% allowed

Question 12

disadvantage 2

Answer 12

Additional administration required to calculate VAT

Question 13

disadvantage 3

Answer 13

No relief for VAT on expenses