Flat Rate Scheme: how to complete your VAT Return box-by-box

At the end of each VAT period - usually every three months - you must complete a VAT Return online. This tells HM Revenue & Customs (HMRC) how much your flat rate turnover was for the period - and the amount of VAT you must pay to HMRC or the amount of VAT you can reclaim from HMRC.

This guide explains in detail how to complete your return if you're on the Flat Rate Scheme.

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Calculating your Flat Rate Scheme turnover

The Flat Rate Scheme is designed to help small businesses by making it easier to record VAT on taxable sales and purchases. If you use the scheme, you normally apply a single percentage, based on your business activity, to your total flat rate turnover in a VAT period, and the result is the VAT you pay.

Read more about the Flat Rate Scheme for VAT

What to do if your flat rate percentage changes during your VAT period

If your flat rate percentage changes during your VAT period, for example, because the VAT rate has changed, you will have to make two calculations. The first calculation - using the old rate - will be from the beginning of your period to the day before the start date for the new flat rate, and the second calculation - using the new rate - from the start date for the new flat rate to the end of your period.

Calculating your flat rate turnover

It's important to work out your flat rate turnover correctly. Your flat rate turnover is all the income you receive, including VAT. If you include items that aren't part of your turnover you'll pay too much VAT. And if you leave items out you'll pay too little and may be assessed by HMRC and have to pay a penalty and interest.

You must include in your flat rate turnover:

  • VAT-inclusive sales and takings for standard-rate, zero-rate and reduced-rate supplies
  • the value of exempt supplies like rent or lottery commission
  • sales of capital expenditure goods, unless they're goods where you reclaimed the VAT on the purchase
  • the value of supplies to other EU countries

You must exclude from your flat rate turnover:

  • private income
  • sale proceeds from goods you own but which haven't been used in your business
  • any sales of gold covered by the VAT Act
  • non-business income and supplies outside the scope of VAT
  • sales of capital expenditure goods where you've reclaimed the VAT on their purchase
  • bank interest

There are three ways that you can calculate your flat rate turnover:

  • Basic turnover. This is the VAT inclusive total of the sales and supplies you've made in the VAT period.
  • Cash-based turnover. This is the VAT inclusive sales and supplies you've been paid for in the VAT period. For more about this method, see the link below.
  • Retailer's turnover. The retailer's turnover method is based on your daily takings. You make a record of payments as you receive them and total the takings every day. To work out the flat rate turnover you add your takings to any other income you receive. For more about this method, see the link below.

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How to complete your online VAT Return for the Flat Rate Scheme

Completing your online return for the scheme is different to completing a return using standard accounting, although some boxes are the same.

You must complete every box on your online return - don't leave any box blank. You need to:

  • put a minus sign before the figure for negative amounts
  • enter '0.00' for 'none' or 'not applicable'

You can find out more about filling in returns for the Flat Rate Scheme in VAT Notice 733.

Read about filling in your VAT Return on the Flat Rate Scheme in VAT Notice 733

Find out how to submit your VAT Return online

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How to complete Box 1 to Box 5

Box 1: VAT due on sales and other outputs

Under the Flat Rate Scheme, you don't need to account for the VAT shown on every invoice you've issued. Instead, you work out your VAT turnover for the period of your return - see Box 6.

When you've calculated your VAT turnover for the period, you then apply your Flat Rate Scheme percentage. For example, if your flat rate turnover for the period is £10,000 and your percentage is 8 per cent then you enter 8 per cent of £10,000 - that is, £800 - in Box 1.

If your percentage changes during a VAT accounting period, you will have to do the following calculations for that period:

  1. apply the old percentage rate to your flat rate turnover from the start of the period up to the day before the rate changes
  2. apply the new percentage rate to your flat rate turnover from the first day of the new rate to the end of the period
  3. add the two figures together to produce the total VAT you owe to HMRC for the period

You may have other output tax to include in the box - for example, the sale of capital expenditure goods on which you've claimed input tax separately while using the scheme. If you've reclaimed the VAT you paid on capital expenditure goods, you must account for VAT at the standard rate when you sell them. You can't account for them at the flat rate.

You need to include any services from abroad that the reverse charge applies to, but don't include the value of the services in your flat rate turnover calculations.

Find out what services bought from abroad the reverse charge applies to.

Box 2: VAT due from you (but not paid) on acquisitions from other EU countries

You need to work out the VAT due - but not yet paid by you - on goods that you buy from other European Union (EU) countries and services directly related to those goods (such as delivery charges). But you do this at the standard rate of VAT and not at your flat rate percentage.

Get information about VAT and international trade

Box 3: total VAT due

This is calculated automatically and is the total of Box 1 and Box 2.

Box 4: VAT reclaimable on your purchases

On the Flat Rate Scheme, you don't normally reclaim VAT on purchases. This box will normally be zero, so enter '0.00'.

But there may be a claim if:

  • You make a single purchase of capital expenditure goods of more than £2,000 in value, including VAT. You must deal with purchases of capital expenditure goods of more than £2,000 outside the Flat Rate Scheme. So, you can reclaim the VAT you paid on them by entering (or including) the VAT figure in Box 4 - see the link below to find out what purchases qualify and how to reclaim the VAT.
  • You apply to join the Flat Rate Scheme and register for VAT at the same time, and you reclaim the VAT on stocks and assets you have on hand at the time you register. You should include this VAT on your first return.
  • You also need to include any services you bought from abroad that the reverse charge applies to, and that you are entitled to claim back the VAT on - this will cancel out the figure you included in your Box 1 total.
  • You are making a claim for bad debt relief.

Find out more about reclaiming VAT on capital expenditure goods

Find out how to reclaim VAT on capital goods bought before you registered for VAT

Box 5: VAT payable or reclaimable

This is calculated automatically from Box 3 and Box 4 - deducting the smaller figure from the larger one and entering the difference.

If the amount in Box 3 is greater than Box 4, you pay this amount to HMRC. On the Flat Rate Scheme, this will normally be the case, because Box 4 is usually zero.

If the amount in Box 3 is less than Box 4, you reclaim this amount from HMRC.

If the amount in Box 5 is zero, you have no VAT to pay or reclaim, but you must still submit your return online.

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How to complete Box 6 to Box 9

Box 6: your flat rate turnover for the period

Enter in Box 6 the flat rate turnover - including VAT - that you applied your flat rate percentage to. For example, if your flat rate turnover for the period is £10,000 and your percentage is 8 per cent then you would enter £10,000 in Box 6 and 8 per cent of £10,000 - that is, £800 - in Box 1. Don't forget to include in your flat rate turnover supplies that are exempt from VAT like rent.

Also include in Box 6 the value - excluding VAT - of anything you sell outside the scheme like capital expenditure goods. Take away any credit notes that you issued or debit notes you received.

Box 7: your total purchases excluding VAT

Because you don't reclaim VAT on purchases on the Flat Rate Scheme, this box will usually be zero unless:

  • you made a single purchase of capital expenditure goods costing more than £2,000 (including VAT) and you're claiming the input tax in Box 4
  • you've acquired goods from other EU countries

In either of these cases, put the VAT exclusive value in this box.

Box 8 and Box 9

You only need to fill in Box 8 and Box 9 if you've supplied goods to or acquired goods from another EU country.

Box 8: the total value of goods you supplied to other EU countries

Put in the total value of goods you supplied to another EU country and services directly related to those goods (such as delivery charges) you supplied to another EU country. Do this for all goods that were physically removed to another EU country, even if there was no actual sale, or if the sale was invoiced to a person or organisation outside the EU. Remember to also include this amount in your Box 6 total. Don’t include the value of services not related to the supply of goods. You will also have to complete an EC Sales List (ECSL).

More about reporting your EU sales using the EC Sales List

Box 9: the total value of goods you acquired from other EU countries

Enter the total value of goods and services directly related to those goods (such as delivery charges) you received from another EU country. Do this for all goods that were physically shipped to you from another EU country, even if there was no actual purchase, or if the goods were invoiced to a person outside the EU. Remember to also include this amount in your Box 7 total.

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More useful links

How to submit your VAT Return online

Log in to HMRC Online Services to submit your VAT Return

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