According to The Tech Nation 2025 report, the UK tech sector was valued at £892.5 billion last year, making it the ‘leading tech ecosystem’ in Europe; and CompTIA figures suggest the sector employed 2.18 million in 2024. IT as a sector is vast, ranging from technical support and web development through to cyber security and, of course, artificial intelligence (AI).
Here at Lewis & Co, we support several small businesses involved in IT from one person working alone providing IT support to small businesses providing IT security. We also work with computer stores, selling all manner of IT related items. Retail, of course, comes with its own challenges, such as cash flow, and this is something we support our clients with.
Some of our clients are self-employed IT contractors, who support a variety of clients or are taken on to work on a project-by-project basis.
If an IT contractor is VAT registered, we often suggest that they might benefit from the Flat Rate Scheme, which will see you pay a fixed rate of VAT to HMRC. This is a way of providing smaller businesses, such as those involved in IT, with a simpler way of calculating their VAT liabilities.
To join this scheme, your VAT turnover must be £150,000 or less. The flat rate you use usually depends on your business type and you get a 1% discount if you’re in your first year as a VAT registered business. This is something we can advise you on at Lewis & Co.
Under the standard VAT scheme, you calculate how much VAT you have charged on invoices during each quarter, then subtract any VAT you have paid on any services or products you have purchased via the company during the same period. The difference is then payable to HMRC.
Under the Flat Rate Scheme, you apply a fixed-rate percentage (of 14.5% for IT contractors) to your turnover, and pay this amount to HMRC each quarter, rather than working out your precise tax liability. The scheme was designed to make VAT accounting simpler for smaller firms, particularly for those, such as IT contractors, who have few costs and therefore not much in the way of input VAT to reclaim if they were not using the scheme.
If you’ve got any questions or need any help, please call our team on: 01892 513515 or email: info@lewisandco.biz