If your customers are able to claim back the VAT they pay but you are not registered for VAT, think again! You will not be registered because you bill out less than £77,000 a year. However you can ask permission to register for VAT voluntarily. Why put yourself to that bother? Well, for some people but not all, using the VAT flat rate scheme can work in their favour.
This is how the scheme works. Depending on the business you are in, you can opt to pay a rate of VAT lower than the normal 20%. In exchange you are not allowed to claim back any VAT you pay. So if in your industry the applicable rate is 13% and your sales come to £50,000, the sums work out like this:
You add VAT at 20% to your bills so £50,000 plus £10,000 equals £60,000. You are then required to pay over to the Revenue 13% on £60,000 or £7,800. Your customers get back the £10,000 you charged so they don’t care. You got £10,000 more in and paid out £7800. You do the math!
