Worked Examples
Example: VAT Return on the Flat Rate Scheme
A worked example of a quarterly VAT return for a small UK consultancy on the Flat Rate Scheme in 2025/26.
Quick answers
How do you calculate VAT on the Flat Rate Scheme?
Apply the correct percentage, including the 16.5% limited-cost-business rate where applicable, to your VAT-inclusive (gross) turnover for the period. The result is the VAT you pay HMRC, regardless of how much VAT you actually charged your customers. You generally can't reclaim input VAT except on qualifying capital goods of £2,000 or more.
When is a quarterly VAT return due?
Quarterly VAT returns and any VAT due are submitted via MTD-compatible software by 1 month and 7 days after the end of the VAT period. So a quarter ending 31 March is due by 7 May.
Can I reclaim input VAT on the Flat Rate Scheme?
Generally no — the flat rate already accounts for input VAT in aggregate. The main exception is qualifying capital goods costing £2,000 or more (including VAT) in a single purchase, on which you can reclaim VAT in the normal way.
Bright Consulting Ltd is a small management consultancy on the Flat Rate Scheme. We'll work through a quarter under MTD for VAT.
The setup
- VAT-registered, on the Flat Rate Scheme.
- Sector: Management consultancy → flat rate 16.5% limited-cost-business rate; assume no first-year discount and no relevant goods other than the capital laptop (which does not count for this test).
- Quarter: 1 January – 31 March 2026.
The quarter's figures
- Sales (net): £30,000
- VAT charged at 20%: £6,000
- Gross sales (VAT-inclusive): £36,000
- Purchases include a single laptop costing £1,800 incl. VAT.
Step 1: Calculate the FRS VAT due
£36,000 × 16.5% = £5,940
This is the VAT you pay HMRC, regardless of how much VAT you actually charged.
Step 2: Reclaim input VAT? Usually no.
On the FRS you cannot reclaim input VAT on most purchases. Exception: qualifying capital goods costing £2,000 or more (incl. VAT) in a single purchase.
The laptop at £1,800 is below £2,000 → no input VAT reclaim.
If she had bought a £2,400 laptop, she could reclaim its £400 of VAT.
Step 3: The numbers on the return
| Box | Amount |
|---|---|
| Box 1 (VAT due on sales) | £5,940 |
| Box 4 (VAT reclaimed on purchases) | £0 |
| Box 5 (Net VAT to pay) | £5,940 |
| Box 6 (Total sales ex VAT) | £36,000 (FRS uses gross) |
| Box 7 (Total purchases ex VAT) | £0 (no qualifying capital-goods VAT reclaim in this example) |
Note: under the FRS, Box 6 is the gross sales figure (different from standard accounting, which uses net).
Step 4: Submit and pay
- File via MTD-compatible software by 7 May 2026 (1 month + 7 days after period end).
- Pay £5,940 by the same date.
Compare to standard accounting
If Bright Consulting were on standard VAT:
Output VAT £6,000
Input VAT £300 (laptop)
─────────────────────
Net to pay £5,700
So FRS costs £240 more than standard accounting in this example. The limited-cost-business test must be applied for each return period. Businesses with lots of expenses are usually better off on standard accounting.
Lessons
- The flat rate is applied to gross (VAT-inclusive) turnover, not net.
- Input VAT reclaim is restricted under the FRS — it pays to model both options before opting in.
- Qualifying capital goods ≥ £2,000 are the main exception.
This is general guidance for the 2025/26 UK tax year and is not personal tax advice. Always check the latest figures on GOV.UK or speak to a qualified accountant for your situation.
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