Flat rate VAT and the 'new media' world

I was speaking to an accountant this afternoon, and the nasty question arose of VAT payment. There’s a ‘flat rate scheme‘ which is meant to make things easier for small businesses. Basically, instead of calculating VAT on every input or output, you just pay a fixed percentage – which is less than the normal 17.5% VAT rate – of your gross sales. So in theory, it makes life easier, and you make a few quid extra.

Here’s the tricky bit: different ‘trade sectors’ qualify for different fixed percentages, in some cases as low as 2% (eg post offices). And inevitably, these sectors aren’t especially well defined for the ‘new media’ business. So which of the following would a website consultant qualify as?

  • Advertising: 9.5%
  • Computer and IT consultancy or data processing: 13%
  • Entertainment or journalism: 11%
  • Film, radio, TV or video production: 10.5%
  • Management consultancy: 12.5%
  • Publishing: 9.5%
  • ‘Anything other activity that is not listed elsewhere’: 10%

I think it’s fair to make a case for almost any of those – and of course, it ultimately comes down to someone else’s discretion. My instinct is to say it’s closest to advertising and/or publishing… but maybe that’s just because it’s the lowest rate. I’d love to hear from anyone who has been through this before, and can advise.

One thought on “Flat rate VAT and the 'new media' world”

  1. I’m trying to answer this very same question at the moment. My work is a mixture of website consultancy and copywriting and I think the best answer for me is ‘business services that aren’t listed elsewhere’ (which has an 11% rate).

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