Flat Rate VAT Scheme Guidance Issued
HMRC has issued guidance on changes to the flat rate VAT scheme which comes into effect from April 2017. The rate rises from 14.5% to 16.5% for limited cost businesses which is likely to include many personal service companies and micro businesses. Limited cost businesses are defined as spending the following amounts on relevant goods, including VAT:
- Less than 2% of VAT flat rate turnover, or;
- Greater than 2% of VAT flat rate turnover but less than £1,000 per year (or relevant proportion of £1,000 for a part-year).
Businesses that spend close to 2% on goods will need to complete this test each time they complete their VAT return. To qualify, relevant goods must be used exclusively for the business purposes with no private use and there are certain exclusions including capital items, road fuel and motor parts (unless it is a transport business), and food and drink for employees.
Published on: 07 March 2017 - By: FCSA