VAT Flat Rate Scheme Changes
From the 1st April 2017, a new flat rate VAT percentage of 16.5% will apply to certain businesses using the Flat Rate VAT Scheme.
This could have a significant effect on the VAT liability of small businesses and it may be beneficial for these businesses to move to standard rate VAT accounting rather than stay in the Flat Rate Scheme.
The new 16.5% rate will apply to “limited cost” traders and will mainly affect labour intensive businesses, such as IT consultants, driving instructors and hairdressers.
A “limited cost” trader is a business which spends less than 2% of its gross turnover in any one quarter on goods. Any capital expenditure, food, vehicles and fuel purchased by the business will not count toward the 2% threshold.
If you currently use the Flat Rate Scheme and you’re unsure whether the new rate will apply to you or you would like more information on whether it would be more beneficial for you to change to standard VAT accounting, please call Sam Burston on 0113 2574506.