Readers’ forum: Does flat rate scheme apply to mobile phone business?

I have a potential client who has a business selling mobile phones to consumers. He is registered for the flat rate scheme. The sale of mobile phones to him is treated as subject to the domestic reverse charge (DRC).

He thinks he falls through a ‘loophole’ whereby he can benefit from the FRS and apply the 7.5% retail rate to his turnover but he also doesn’t incur any irrecoverable input tax. It feels too good to be true but I can’t see where he’s wrong.

I don’t think the sales are excluded from flat rate turnover because his supplies are to private consumers and are not subject to the domestic reverse charge (SI 1995/2518 reg 55C(6)).

I think his purchases fall outside the flat rate scheme because the wholesale supply to him is subject to the domestic reverse charge but the output and input tax should net off to zero...