Latest news from HMRC is the Flat Rate Scheme for VAT is changing on 1st April 2017.
There will be a new VAT flat rate of 16.5%. It will apply to businesses in any sector, however, only if they have limited costs.
HMRC have said a limited cost trader will be defined as one whose VAT inclusive expenditure on goods is one of the following:
- less than 2% of their VAT inclusive turnover in their prescribed period
- greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if not one year then it will be the relevant proportion of £1000).
If you are using the Flat Rate Scheme or you are planning on joining the scheme then you will need to decide whether you should use this new rate.
The new scheme has been introduced to tackle abuse to the scheme and make sure all business are paying the appropriate amount of VAT. For more information from HMRC click here.
A point to note here though is the definition of goods. The amount spent on goods cannot include any purchases of capital expenditure, food or drink, or vehicles and fuel. It also excludes the purchase of anything intangible such as accountancy or bookkeeping costs, phone costs, email/website/hosting fees, insurances etc.
HMRC will soon be releasing more information on this so don’t worry if you think this will affect you, we can help you see if your business falls into the limited cost trader bracket
Don’t forget, if your turnover is more than £83,000 or you are approaching it then you must register for VAT.
Contact us for more information.