My first question - I've been looking at the flat rate VAT scheme but don't have a clue what category would suit best, at the moment I will be retailing hardware (tools and fittings) online to a mix of private and business customers. I will also be taking on small welding & fabrication jobs for business customers. At some point in the future I may add more services to the business. Do I choose the type of business that the majority of the company will be doing?
Yes you use the category that the majority of your turnover is - i would say the following flat rate category is the most suitable.
Trade - Harware
Sector to use - Retailing that is not listed elsewhere 7.5
Could the business type be changed as the business changes? Under these circumstances would it be better to go for standard VAT rather than VAT flat rate scheme?
Yeppers you can leave the flat rate at any time (or swap to different rate if your turnover type changes) as long as you have not submitted the relevant return and the return is not late - so in some respects each period you can hedge your bets by doing calculations both ways and leaving the scheme if you think its appropriate. Only only proviso being is that when you leave you must stay off the flat rate for 12 months and can only rejoin later if your turnover is below the threshold - so sometimes staying on even though it costs you more for one return may be the way to go.
good news for you is that the 7.5% rate is quite a low rate - although the 7.5% is a bit of a con in that its 7.5% of gross vat inclusive turnover - you pay 9% of net sales invoice value.
Either way if you always do calculations both ways unless the numbers are so obviously skewed in one direction then you can have all the available options.
Note its the same joining flat rate as long as return is not submitted or late then you can apply to join after period end when you have done calcs before your submit return - so no real need to second guess the current period.
The past is what it is - if you have understated vat previously then its a a given that hmrc should be paying slightly closer attention to you that someone else they have checked and given a clean bill of health too. However there are also many businesses who have never had a check and many businesses in areas where vat is likely to be materially understated. Gone are the days wehn every businesses had a visit from the friendly vatpersonage within the first 4 years of trading. Either way i wouldn't worry just take all reasonable effort to make sure things are correct and if you have previously had issues due to slapdashness then try and make that extra effort to keep it all as it should be.