Which of the following is true about VAT under the flat rate scheme?

The flat rate scheme for VAT allows businesses to calculate their VAT liability as a straightforward percentage of their total-inclusive turnover. This means that rather than having to account for VAT on each sale and purchase, a business simply applies the flat rate percentage to the gross sales figures, making it simpler to manage and reducing the administrative burden associated with detailed VAT accounting.

This approach is particularly advantageous for small businesses with simpler VAT reporting needs, as it streamlines the process and can sometimes result in paying less VAT to HMRC, compared to accounting for input VAT in the conventional method. Therefore, stating that it is calculated as a percentage of total-inclusive turnover accurately reflects the nature of how the flat rate scheme operates.

In terms of the other options, the scheme does not involve detailed accounting on each invoice, nor does it eliminate the need to file VAT returns entirely; businesses must still submit VAT returns, just with simplified calculations. Additionally, the flat rate scheme is designed for small to medium-sized enterprises, not exclusively for large businesses.