The Government has announced changes to the VAT Flat Rate Scheme, with effect from April 2017:
Most businesses that do not trade in goods, will be affected by these changes. The new rules introduce the concept of a “Limited Cost Trader” (LCT) which is a business whose VAT-inclusive expenditure on goods (as opposed to services such as rent, heat, light, travel and accountancy) is less than 2% of its VAT-inclusive turnover. Goods for this purpose exclude capital expenditure.
It is likely that many small businesses will be LCTs and therefore the new 16.5% Flat Rate will apply from April 2017. These businesses will almost certainly be better off coming out of the Flat Rate Scheme from 31 March 2017. From that date they will be better off identifying input VAT (VAT on expenses) and accounting for VAT on the standard basis.
There is an online tool to check your Flat Rate:
Contact Don Fisher or Kamila Piszczek for further information.