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VAT Notice 733

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Am I using the right FRS rate?

Q. I trade as a health and safety consultant and I have used the flat rate scheme for many years because it means I do not have to keep input tax records. I have always used the category for management consultancy and paid 14.5% VAT on my gross sales. But I wonder if this category is correct because I am not trading as a management consultant. Should I ask HMRC for its thoughts?

A. The choice of flat rate category must be made by the owner of the business and HMRC will not challenge your choice retrospectively if it is reasonable. Your choice of management consultancy has logic but is not correct because, as you say, you are not a management consultant.

There is no specific category for health and safety consultants so you should use the category for “business services not listed elsewhere” which has a favourable rate of 12%.

However, this is not the end of the story. If your business spends less than £250 per quarter including VAT or 2% of your gross turnover on “relevant goods” then you will be classed as a limited cost trader and must apply a rate of 16.5%. The list of goods that do not qualify as relevant goods is lengthy, so you should review VAT Notice 733 , specifically section 4 (see The next step ).

VAT Notice 733