If you’re on The VAT Flat Rate Scheme or your turnover is under £150,000 a year excluding VAT, there are changes happening from 1 April 2017 you need to know about.
From 1 April 2017, there’s an introduction of a higher flat rate for small businesses that use the scheme and spend very little on goods, such as contractors and consultants.
These businesses which have a low-cost base are now called ‘limited cost traders’ and will pay a higher flat rate of 16.5%. You’ll be classed as a limited cost trader if your goods cost less than:
For example, if your turnover is £20,000 for the quarter and your expenses are £325. Your expenses are greater than £250 but still less than 2% of your turnover. So you would use the 16.5% flat rate.
HMRC are trying to limit the expenses to cover only what’s required to run your business.
Materials that can be claimed back are:
You can’t claim back any:
There are a few options available to you, all of which should be carefully considered. You could:
The scheme can be more complicated than expected. You can use HMRC’s online calculator to give you some guidance. We can also work with you to keep monitoring your turnover and expenses to ensure you’re in the right scheme.
If you’d like to chat, please email the team: firstname.lastname@example.org. Especially if you’d like to make some changes, as there could be some implications from HMRC.
Book a call at a time that suits you