2 min read
Definition
The flat-rate VAT scheme lets eligible small businesses pay VAT as a fixed percentage of their gross turnover, rather than calculating the difference between VAT charged and VAT reclaimed on every transaction. It simplifies VAT and can affect cash flow, for better or worse depending on the business.
In plain terms
Instead of tracking input and output VAT in detail, you apply a set flat rate to turnover. It reduces admin, and the cash-flow impact depends on your costs and margins — some businesses gain, others are better on standard accounting.
Why it matters
Whether it helps cash flow is business-specific and worth checking. See VAT cash accounting.
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