Client is on the wrong Flat Rate VAT scheme %

Changing VAT Flate rate percentage he is on

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When my client registered, July 2020, for VAT he selected the VAT Flat Rate scheme rate of 16.5%, but now believes he should be on a rate of 7.5% (retailing not listed elsewhere).  How easy is it to:

1. Change the Flat Rate sector from 16.5% to 7.5%

2. Can he back date the rate to when he first registered.

Your feedback would be appreciated, since dealing with HMRC over VAT can be very difficult.

Replies (5)

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By David Ex
23rd Feb 2024 11:02

Not sure what answers you’ll get. You never responded to or acknowledged responses to your previous question.

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By Jason Croke
23rd Feb 2024 11:10

If the client has chosen the wrong sector then it should be possible to historically adjust the position.

The difficulty will be that the client chose the sector (not HMRC's error) so client will need to convince HMRC as to why the sector they chose originally was wrong and the sector they want to switch to is the right sector....so be prepared to provide evidence as to why the original decision was wrong....HMRC will not just let you change the percentage on your say so, if client was wrong before, they could be wrong again, so it'll need some convincing.

You state the client is on the 16.5% rate....there is no flat rate sector that is 16.5%.

There is a 16.5% rate under the limited cost trader rules which over-rides any flat rate percentage when the limited cost traders conditions apply. The 16.5% is not in itself a trade sector.

So first of all, check what rate the client actually chose originally, they would not have written 16.5% of the application form, as that is not a trade sector. Once you know what sector they were in, then you'll be able to then argue as to why that sector was wrong.

You need to thoroughly read the flat rate notice https://www.gov.uk/guidance/flat-rate-scheme-for-small-businesses-vat-no... if you are to assist your client in this matter.

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By bendybod
26th Feb 2024 10:07

Don't forget they are obliged to check every quarter whether their activity comes in to the limited cost trader rules so it is entirely possible that some quarters they did and some they didn't.
In my experience, it is pretty difficult to persuade HMRC that a prior selection was incorrect, especially between these two particular selections. It is down to the client to select the appropriate rate so presumably there must have been a reason for selecting 16.5%.

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By Novice Accountant
26th Feb 2024 15:48

Apologies for delay in responding to comments. Been in hospital for a minor procedure.

I have managed to speak with HMRC (after an obviously long time on-hold). They came back and said my client was on 7.5%. It appears that client entered 16.5% in his software, oblivious he shoud have put lower rate. I am now negotiating about whether he can go back and reclaim past (overpaid) VAT.

The client's Agent area does not appear to show the VAT % rate he is on, hence the phone call.

Thank you for the responses.

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Replying to Novice Accountant:
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By bendybod
27th Feb 2024 16:25

Glad you got it sorted. No, it is one of the many frustrations when dealing with HMRC online as agents!

I hope you are well and recovering.

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