Flat-rate scheme (FRS) users avoid accounting internally for VAT on all their purchases and sales.

They calculate the VAT due to HMRC by applying the ‘appropriate flat-rate percentage’ for the trade category (sector) to the VAT-inclusive turnover, including all reduced-rated, zero-rated and exempt supplies, but not sales that are ‘outside the scope’ of VAT (Value Added Tax Regulations 1995 (SI 1995/2518), reg. 55H).

This turnover figure includes the value of any supplies to other member states.

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