![]() ![]() If the tech finishes the job in one hour, they still get paid for two hours. For example, Job X will take a good tech two hours to complete. Ready to learn all about wages? Let’s go! What is a flat rate?Ī flat rate is tied to a particular job. But we’ll lay out the background of each in an effort to help you make the right choice. We’re not going to take a stand and say which is better that is up to you and your shop. ![]() You see, in our modern world we have all kinds of ways you can pay a person. Let’s talk about that last question a little more. Should you pay your techs a flat rate or an hourly wage?. ![]() Will you help them continue their education?.How will you make sure they’re staying efficient?.How can I join the Flat Rate Scheme?īefore joining the Flat Rate Scheme, you need to be registered on the standard VAT scheme.If you’re employing technicians (or thinking about employing them) certain questions inevitably come up: Both of these scenarios could lead to you paying more in VAT. So it may be best to avoid it if you are making a large number of purchases or making a large number of VAT-exempt sales. The main drawback of using the Flat Rate Scheme is that you cannot reclaim VAT on any of your purchases. It has lower fixed rates than the standard rate.It helps your business to manage cash flow.There are three main benefits to the Flat Rate Scheme: To be classed as a limited cost trader, your business must have a VAT-inclusive expenditure on goods of less than 2% of your turnover.Īlternatively, it can be more than 2% of VAT inclusive turnover as long as it is less than £1000 per annum. If your business is considered to be a limited cost trader, you will have to pay 16.5%. For example, “boarding or care of animals” is currently set at 12% (as of June 2022). This rate is a percentage of the turnover and will vary by what the business does. The Flat Rate Scheme was developed in 2002 as a simplified version of the VAT scheme.īusinesses have to pay a set VAT rate rather than accounting for both input and output VAT. What’s the difference between standard VAT and the Flat Rate Scheme? While you can voluntarily register for VAT, registering is compulsory if your turnover is above £85,000. While most items are subject to the 20% charge, there is also a reduced rate of 5% and a zero rate.Īny VAT that consumers pay is passed on to HMRC by the business through their VAT return (typically every quarter). The business calculates the amount of VAT to be charged and then passes this on to the customer.įor example, the business could sell an item for £1 they will then charge the consumer £1.20. What is the standard VAT scheme?īefore we move on to the Flat Rate VAT scheme, it’s important to understand how the standard VAT scheme works.Ĭonsumers need to pay tax on the sales of goods, known as Value-Added Tax (VAT). From this, you can begin to draw your own conclusions on whether the Flat Rate Scheme is suitable for you.īefore deciding which route to go down, we recommend speaking to an accountant who can give you clear advice on which route to take for your circumstances. However, this post will highlight the differences between Flat Rate and standard VAT, and some of the benefits and drawbacks of using the Flat Rate Scheme. Flat Rate VAT - Could My Company Benefit From Using It?Īs with all things business, there’s no one size fits all answer to whether your company should be using the Flat Rate VAT Scheme.
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