The flat rate scheme: a percentage of turnover
On the flat rate scheme a business pays HMRC a fixed percentage of its sales including VAT. Work out the VAT and compare it.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
The flat rate scheme is a simpler way for a small business to work out its VAT. The business still charges its customers VAT at the normal rate.
It does not pay HMRC the VAT it charged less the VAT on its purchases. It pays a fixed percentage of its flat rate turnover, which is its sales including VAT.
The percentage depends on the type of business and is set by HMRC. The current percentages are on GOV.UK. Each question here gives the percentage to use.
Lund Design is a one person design studio. In the three months ended 30 September it invoices its clients £12,000 before VAT. VAT is 20%.