Picking the wrong VAT scheme costs four-figure sums a year for most service businesses. Run your turnover and input VAT through the comparator to see whether the Flat Rate Scheme beats Standard VAT for you, and whether the Limited Cost Trader rules would force you onto the 16.5% sector rate anyway.
VAT element of your business costs, such as software, freelancers if VAT-registered, equipment. Standard scheme reclaims this; flat rate does not.
Spend on physical goods used in the business. Excludes services, software, stationery for own use, travel, capital items. For most service businesses this is very low.
Limited Cost Trader rate (16.5%) applies because goods spend is below 2% of VAT-inclusive turnover or £1,000. Flat Rate is rarely beneficial for service businesses with LCT status.