There has been a change in the VAT Flat Rate Scheme since
April 2017. The government are concerned that some businesses are using the
scheme to pay less VAT than appropriate. Read our blog to be reminded of the
rules and regulations.
The Flat Rate Scheme is designed to simplify your records of
sales and purchases. It allows you to apply a fixed flat-rate percentage to
your gross turnover to arrive at the VAT due.
The scheme is for businesses with a turnover no more than
£150,000 a year, excluding VAT. The Flat Rate Scheme is a simpler method of
working out the VAT you have to pay to HMRC. The flat rate percentage you
use depends on your business sector. The correct sector is the one that most
likely describes what your business will be doing in the coming year. Click
here to find out your sector percentage https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay
From 1 April 2017 the flat rate changes if you’re a limited
cost business. The flat rate percentage will be 16.5% regardless of your sector
if you are a limited cost business. You’re a limited cost business if the
amount you spend on relevant goods including VAT is either, less than 2% of
your VAT flat rate turnover or greater than 2% of your VAT flat rate turnover
but less than £1000 per year.
You will also get a 1% discount if it is your first year as a
VAT registered business. If you’re unsure about your VAT and would like to
discuss, then please don’t hesitate to contact us.