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.