[denisjk]

I’m trying to understand if:
a) I pay the flat rate (7.5% in this scenario) on the sale price
b) Do I also need to pay the reverse charge on the purchase price?

The cause of this confusion are the following FRS guidance / statements from HMRC:

• cannot reclaim the VAT on your purchases (except for certain capital assets over £2,000)
• Flat Rate Scheme users who receive reverse charge supplies will have to account for the VAT due to HMRC and recover it at the same time on the same VAT Return.

References:

• https://www.gov.uk/vat-flat-rate-scheme#:~:text=you%20cannot%20reclaim%20the%20VAT%20on%20your%20purchases%20%2D%20except%20for%20certain%20capital%20assets%20over%20%C2%A32%2C000
• https://www.gov.uk/guidance/vat-reverse-charge-technical-guide#:~:text=Flat%20Rate%20Scheme%20users%20who%20receive%20reverse%20charge%20supplies%20will%20have%20to%20account%20for%20the%20VAT%20due%20to%20HMRC%20and%20recover%20it%20at%20the%20same%20time%20on%20the%20same%20VAT%20Return.

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