Flat Rate Vat Calculator 2019

Calculate your VAT obligations under the 2019 Flat Rate Scheme with precision. Get instant results and visual breakdowns.

Comprehensive Guide to the Flat Rate VAT Scheme 2019

The Flat Rate VAT Scheme was introduced by HMRC to simplify VAT accounting for small businesses. In 2019, the scheme underwent several important changes that business owners needed to understand to remain compliant while optimizing their tax position.

What is the Flat Rate VAT Scheme?

The Flat Rate Scheme (FRS) is an alternative VAT accounting method where businesses pay a fixed percentage of their VAT-inclusive turnover to HMRC, rather than calculating the difference between VAT charged to customers and VAT paid on purchases.

Key Benefits of the 2019 Flat Rate Scheme

• Simplified accounting: No need to record VAT on every transaction
• Predictable payments: Fixed percentage makes cash flow easier to manage
• Potential savings: Some businesses pay less VAT than under standard accounting
• Reduced administration: Less paperwork and simpler VAT returns

Eligibility Criteria for 2019

To join the Flat Rate Scheme in 2019, businesses had to meet these requirements:

1. VAT-registered business
2. Expected VAT taxable turnover (excluding VAT) of £150,000 or less in the next 12 months
3. Not using one of the VAT margin schemes (for second-hand goods, etc.)
4. Not closely associated with another business

2019 Flat Rate Percentages by Business Sector

The flat rate percentage depends on your business type. Here are the 2019 rates:

Business Type	Flat Rate Percentage
Accountancy or bookkeeping	14.5%
Advertising	12%
Architecture, civil or structural engineering	10%
Catering services including restaurants and takeaways	11%
Computer or IT consultancy	12%
Farming or agriculture	8.5%
Hairdressing or beauty treatments	10%
Journalism or publishing	12%
Legal services	14.5%
Management consultancy	12%
Retail (not food, vehicles, or pharmaceuticals)	10%
Veterinary services	12%
All other business types	16.5%

Important 2019 Changes to the Scheme

2019 saw two significant changes to the Flat Rate Scheme:

1. Limited Cost Trader Test: Introduced in 2017 but fully enforced in 2019, this required businesses spending less than 2% of turnover (or £1,000 per year) on goods to use a 16.5% rate regardless of their business type. This was HMRC’s response to concerns about abuse of the scheme.
2. Capital Assets Rule: Businesses could claim back VAT on capital assets costing £2,000 or more (including VAT) in addition to paying their flat rate percentage. This was an important cash flow consideration for businesses making significant equipment purchases.

How the Flat Rate Scheme Works: Step-by-Step

Here’s how to calculate your VAT under the 2019 scheme:

1. Calculate your VAT-inclusive turnover: Add 20% VAT to your sales
2. Apply your flat rate percentage: Multiply the VAT-inclusive turnover by your sector’s percentage
3. Subtract VAT on purchases: Deduct any VAT you’ve paid on business purchases (except capital assets)
4. Adjust for capital assets: If you’ve bought assets over £2,000, you can reclaim this VAT separately
5. Pay the difference: The resulting figure is what you pay to HMRC

Flat Rate Scheme vs Standard VAT Accounting

Choosing between the Flat Rate Scheme and standard VAT accounting depends on your business circumstances:

Factor	Flat Rate Scheme	Standard VAT Accounting
Complexity	Simple – just apply percentage	More complex – track all VAT
Cash Flow	Predictable payments	Can vary significantly
VAT on Purchases	Generally can’t reclaim (except capital assets)	Can reclaim all VAT on purchases
Best For	Businesses with low expenses, B2C companies	Businesses with high expenses, B2B companies
2019 Changes Impact	Limited Cost Trader test affects many	No direct impact from FRS changes

Common Mistakes to Avoid in 2019

Businesses often made these errors with the Flat Rate Scheme:

• Using the wrong percentage: Always check your business type matches HMRC’s classification
• Ignoring the Limited Cost Trader test: Many businesses didn’t realize they qualified as limited cost traders
• Forgetting about capital assets: Not claiming back VAT on qualifying assets
• Mixing accounting methods: Using cash accounting for VAT but accrual for other taxes
• Not reviewing annually: Business circumstances change – what was optimal one year might not be the next

When to Leave the Flat Rate Scheme

Consider leaving the scheme if:

• Your turnover exceeds £230,000 (the 2019 deregistration threshold)
• You become a limited cost trader and the 16.5% rate makes the scheme unprofitable
• Your business expenses increase significantly (making standard accounting more beneficial)
• You start dealing with VAT-exempt supplies

Record Keeping Requirements for 2019

Even with simplified accounting, you still needed to keep:

• Records of all sales and income
• VAT invoices for purchases over £250 (or for capital assets)
• Records of any VAT paid on purchases
• Bank statements and payment records
• Any documents showing your business type and flat rate percentage

Case Study: 2019 Flat Rate Scheme in Practice

Let’s examine how the scheme worked for a typical IT consultancy in 2019:

Business: Small IT consultancy with £80,000 turnover
Flat Rate: 12% (for computer services)
VAT on Purchases: £1,200
Capital Assets: £3,000 (new server)

Calculation:

1. VAT-inclusive turnover: £80,000 × 1.20 = £96,000
2. Flat rate VAT: £96,000 × 12% = £11,520
3. Less VAT on purchases: £11,520 – £1,200 = £10,320
4. Capital asset adjustment: Reclaim £500 (1/6 of £3,000 VAT)
5. Final payment: £10,320 – £500 = £9,820

Under standard accounting, this business might have paid more VAT, making the Flat Rate Scheme beneficial in this case.

Expert Tips for Optimizing Your Flat Rate VAT

Based on 2019 regulations, here are professional strategies:

1. Monitor your expenses: If your costs increase, standard accounting might become more advantageous. The break-even point is typically when your input VAT exceeds about 10-12% of your VAT-inclusive turnover.
2. Time your capital purchases: If you’re planning significant equipment purchases, consider timing them to maximize VAT reclaim under the capital assets rule.
3. Review your business classification: Some businesses could legitimately fit into multiple categories with different rates. Ensure you’re using the most favorable percentage that HMRC would accept.
4. Consider cash flow impacts: While the Flat Rate Scheme simplifies accounting, it can create cash flow challenges if you have significant VAT expenses you can’t reclaim.
5. Plan for the Limited Cost Trader test: If you’re close to the 2% threshold, consider whether you can increase your spending on goods to avoid the 16.5% rate.

Frequently Asked Questions About 2019 Flat Rate VAT

Q: Can I join the Flat Rate Scheme at any time?

A: Yes, you can join at any time, but it’s typically most advantageous to join at the start of your VAT period. You must apply to HMRC to join the scheme.

Q: What counts as “goods” for the Limited Cost Trader test?

A: Goods are physical items you buy for your business. They don’t include:

• Capital expenditures (these are handled separately)
• Food or drink for you or your staff
• Vehicles or parts for vehicles (unless you’re in transport)
• Services (which are very different from goods)

Q: How does the Flat Rate Scheme work with the VAT threshold?

A: In 2019, the VAT registration threshold was £85,000. You could stay in the Flat Rate Scheme until your turnover reached £230,000, at which point you had to leave the scheme (though you could continue using standard VAT accounting).

Q: Can I reclaim VAT on purchases under the Flat Rate Scheme?

A: Generally no, except for:

• Capital assets costing £2,000 or more (including VAT)
• Certain specific items where input tax can be reclaimed even on the Flat Rate Scheme

Q: What happens if I make a mistake on my Flat Rate VAT return?

A: You should correct errors as soon as possible. For errors under £10,000, you can adjust your next VAT return. For larger errors, you may need to notify HMRC separately. Penalties may apply for careless or deliberate errors.

Official Resources and Further Reading

For authoritative information about the 2019 Flat Rate VAT Scheme, consult these official sources:

• GOV.UK: VAT Flat Rate Scheme overview – Official government guidance on the scheme
• HMRC Notice 733 (2019 version) – The complete technical notice for the Flat Rate Scheme
• ICAEW Flat Rate Scheme guidance – Professional accountancy body’s analysis (archive for 2019 information)

Conclusion: Is the 2019 Flat Rate Scheme Right for Your Business?

The Flat Rate VAT Scheme can offer significant advantages for eligible businesses, particularly those with relatively low expenses. However, the 2019 changes – particularly the Limited Cost Trader test – made the scheme less attractive for some business types.

Key takeaways for 2019:

• The scheme remains valuable for businesses with turnover under £150,000 and limited expenses
• Careful classification of your business type is crucial to use the correct percentage
• The capital assets rule provides important cash flow benefits for businesses making significant equipment purchases
• Regular review is essential as your business circumstances change
• Professional advice can help optimize your VAT position, especially around the Limited Cost Trader threshold

For businesses that qualified, the 2019 Flat Rate Scheme continued to offer a simpler alternative to standard VAT accounting, though the benefits became more nuanced with the introduction of the Limited Cost Trader category. Always consult with a VAT specialist to determine the best approach for your specific business situation.