The Practical Guide to Limited Company Tax
If you have chosen to operate your business as a limited com...
If you decided to take the plunge and be your own boss, one of the first decisions you’ll need to ...
Published: 6th August 2018
By Jonathan London on 4th February 2014
Flat Rate VAT scheme – Rates payable by sector
Most contractors and freelancers, and in particular those with low VAT rated expenses, opt for the Flat Rate VAT Scheme (FRS). This allows you to charge your clients the full 20% VAT rate on your outgoing invoices, yet pay HMRC a lower rate – and keep the difference.
The rate you pay HMRC will depend on your business category as shown in the table below.
| Business category | Percentage you pay to HMRC |
| Accountancy or book-keeping | 14.5 |
| Advertising | 11 |
| Agricultural services | 11 |
| Any other activity not listed elsewhere | 12 |
| Architect, civil and structural engineer or surveyor | 14.5 |
| Boarding or care of animals | 12 |
| Business services that are not listed elsewhere | 12 |
| Catering services including restaurants and takeaways | 12.5 |
| Computer and IT consultancy or data processing | 14.5 |
| Computer repair services | 10.5 |
| Dealing in waste or scrap | 10.5 |
| Entertainment or journalism | 12.5 |
| Estate agency or property management services | 12 |
| Farming or agriculture that is not listed elsewhere | 6.5 |
| Film, radio, television or video production | 13 |
| Financial services | 13.5 |
| Forestry or fishing | 10.5 |
| General building or construction services | 9.5 |
| Hairdressing or other beauty treatment services | 13 |
| Hiring or renting goods | 9.5 |
| Hotel or accommodation | 10.5 |
| Investigation or security | 12 |
| Labour-only building or construction services | 14.5 |
| Laundry or dry-cleaning services | 12 |
| Lawyer or legal services | 14.5 |
| Library, archive, museum or other cultural activity | 9.5 |
| Management consultancy | 14 |
| Manufacturing fabricated metal products | 10.5 |
| Manufacturing food | 9 |
| Manufacturing that is not listed elsewhere | 9.5 |
| Manufacturing yarn, textiles or clothing | 9 |
| Membership organisation | 8 |
| Mining or quarrying | 10 |
| Packaging | 9 |
| Photography | 11 |
| Post offices | 5 |
| Printing | 8.5 |
| Publishing | 11 |
| Pubs | 6.5 |
| Real estate activity not listed elsewhere | 14 |
| Repairing personal or household goods | 10 |
| Repairing vehicles | 8.5 |
| Retailing food, confectionary, tobacco, newspapers or children’s clothing | 4 |
| Retailing pharmaceuticals, medical goods, cosmetics or toiletries | 8 |
| Retailing that is not listed elsewhere | 7.5 |
| Retailing vehicles or fuel | 6.5 |
| Secretarial services | 13 |
| Social work | 11 |
| Sport or recreation | 8.5 |
| Transport or storage, including couriers, freight, removals and taxis | 10 |
| Travel agency | 10.5 |
| Veterinary medicine | 11 |
| Wholesaling agricultural products | 8 |
| Wholesaling food | 7.5 |
| Wholesaling that is not listed elsewhere | 8.5 |
Remember, you will receive a 1% discount on your appropriate percentage throughout your first year on the Flat Rate VAT Scheme. The drawback is the only VAT you can claim back for your business expenses if you choose to join the FRS is on capital asset purchases with receipt values over £2,000.
If your annual turnover exceeds £230,000 in VAT inclusive revenue, you won’t qualify for the scheme.
At Boox, we can advise you on your VAT options and help you maximise profitability and improve cash flow. VAT Registration and Guidance are included as part of our monthly online accounting service, along with your quarterly VAT returns.
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