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