In line with the temporary reduction in the VAT rate to 5% for certain businesses in the hospitality sector, the flat rates for smaller businesses have also been reduced.
The VAT flat rate scheme is designed to simplify accounting records of sales and purchases, and the steps necessary to calculate VAT liabilities. It allows for a fixed flat rate percentage to be applied to gross turnover to arrive at the VAT due.
Fixed rate percentages vary depending on the type of business. The main benefits of the scheme are:
From 15 July until 12 January 2021, the flat rates have been reduced as follows:
Financial accounting systems will need to be changed to ensure that the new flat rates are applied for the period, and those businesses that qualify can take full advantage of the opportunity.