The VAT flat-rate scheme allows a company to keep a percentage of the VAT charged but not reclaim any VAT on purchases. It is designed to simplify VAT returns for smaller businesses. A company can apply to join the flat-rate scheme if its turnover is predicted to be less than £150,000 in the first 12 months, and the business does not have to leave the scheme until its turnover (including VAT) reaches £230,000.
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