2nd February 2026

Hi everyone,

 

Are you on the best VAT scheme?  

 

Did you know that there was more than one scheme?

 

In fact there are quite a few:

• Accruals basis – you pay VAT based on your invoices raised / bills received.
• Cash basis – you pay VAT based on what went through your bank account – this can be advantageous for cashflow as you only pay VAT on income you have received, however there are limits and you can’t join the scheme if your turnover is over £1.35m.
• Flat rate scheme – you pay a flat rate of VAT on your gross sales, however this is often misused and misunderstood as limited cost traders pay a flat rate of VAT at 16.5%. As this is on the gross sales (ie £10,000 + £2,000 of VAT = £12,000 and under the normal VAT rules you would have £2,000 VAT to pay to HMRC less any VAT on your costs that you can recover. Under the flat rate scheme you’d pay £1,980 – 16.5% of £12,000 – so if you have input VAT of more than £20 you would be better off on the normal VAT schemes).
• Margin schemes – if you sell second hand goods, works of art, antiques, collectors items then you only pay VAT on the margin that you make.
• Retail schemes of which there are 3 (point of sale scheme / apportionment scheme / direct calculation scheme).

And this doesn’t include the special rules surrounding sales to the EU that may be subject to the One Stop Shop (OSS) or digital services under the Mini One Stop Shop (MOSS) or even registering for VAT in other countries if you breach the threshold.

 

In short, VAT is a minefield and if you need any professional advice please contact us:

 

Tel:       0141 332 6331

Email:  mail@russell-russell.co.uk

 

Take care until the next time

 

 

Russell + Russell