A VAT flat rate scheme is one of the VAT rate schemes for which you need to pay a flat rate VAT to HMRC.
The purpose of this scheme is to simplify the VAT return process for small businesses. It ensures that businesses pay almost the same amount of VAT without going through the hassles of completing a lot of paperwork like other VAT schemes.
In the VAT flat rate scheme:
You pay VAT at a fixed rate to HMRC.
You will keep the difference between what you receive from your customers and pay to HMRC.
You will not be able to recover the VAT on the items you purchased, except for specific capital assets worth more than £2,000.
To use this scheme the VAT turnover of your business must be £150,000 or less (excludes VAT), and you need to apply to HMRC.