Box 1: VAT due on sales and other outputs
Under the Flat Rate Scheme, you don’t need to account for the VAT shown on every invoice you have issued. Instead, you work out your VAT turnover for the period of your return – see Box 6.
When you have calculated your VAT turnover for the period, you then apply your Flat Rate Scheme percentage. For example, if your flat rate turnover for the period is £10,000 and your percentage is 8 per cent then you enter 8 per cent of £10,000 – that is, £800 – in Box 1.
If your percentage changes during a VAT accounting period, you will have to do the following calculations for that period:
- apply the old percentage rate to your flat rate turnover from the start of the period up to the day before the rate changes
- apply the new percentage rate to your flat rate turnover from the first day of the new rate to the end of the period
- add the two figures together to produce the total VAT you owe to HM Revenue & Customs (HMRC) for the period
You may have other output tax to include in the box like the sale of capital expenditure goods on which you have claimed input tax separately while using the scheme. If you have reclaimed the VAT you paid on capital expenditure goods, you must account for VAT at the standard rate when you sell them. You can’t account for them at the flat rate.
You need to include any services from abroad that the reverse charge applies to, but don’t include the value of the services in your flat rate turnover calculations.
Find out what services brought from abroad the reverse charge applies to in our related guide below.
Imports and purchases from abroad: paying and reclaiming VAT
Box 2: VAT due from you (but not paid) on acquisitions from other EU countries
You need to work out the VAT due – but not yet paid by you – on goods, services directly related to those goods (such as delivery charges) that you buy from other European Union countries. But you do this at the standard rate of VAT and not at your flat rate percentage.
Find information about VAT and international trade in our section below.
International trade, international visits and VAT
Box 3: total VAT due
This is the total of Box 1 and Box 2 added together. This is calculated automatically when you complete your return online.
Box 4: VAT reclaimable on your purchases
On the Flat Rate Scheme, you don’t normally reclaim VAT on purchases. This box will normally be zero, so enter “0.00” if you’re filling in your return online or write “NONE” on a paper return.
But there may be a claim if:
- You make a single purchase of capital expenditure goods of more than £2,000 in value, including VAT. You must deal with purchases of capital expenditure goods of more than £2,000 outside the Flat Rate Scheme. So you can reclaim the VAT you paid on them in Box 4 – see the link below to find out what purchases qualify and how to reclaim the VAT.
- You apply to join the Flat Rate Scheme and register for VAT at the same time, and you reclaim the VAT on stocks and assets you have on hand at the time you register. You should include this VAT on your first return.
- You also need to include any services you bought from abroad that the reverse charge applies to, and that you are entitled to claim back the VAT on – this will cancel out the figure you included in your Box 1 total.
You can find out more about reclaiming VAT on capital expenditure goods and capital goods bought before you registered for VAT in our related guides below.
Flat Rate Scheme for VAT
Purchases made before VAT registration: reclaiming the VAT
Box 5: VAT payable or reclaimable
Take the figures from Box 3 and Box 4. Deduct the smaller figure from the larger one and put the difference in Box 5. This is calculated automatically when you complete your return online.
If the amount in Box 3 is greater than Box 4, you pay this amount to HMRC. On the Flat Rate Scheme, this will normally be the case, because Box 4 is usually zero. If the amount in Box 3 is less than Box 4, you reclaim this amount from HMRC. If the amount in Box 5 is zero, you have no VAT to pay or reclaim, but you must still submit your return.