The April 2017 VAT Flat rate scheme changes

What has changed with VAT flat rate schemes?

Previously under the flat rate scheme a business would calculate their VAT based on a flat rate which is based on the nature of the business however, in April 2017 HMRC introduced VAT flat rate scheme changes which affected businesses with a very low-cost basis. This means that a business will be classed as “limited cost traders” if they spend:

• Less than  2% of their VAT inclusive turnover on goods in an accounting period, or
• More than 2% of their VAT inclusive turnover but less than £1,000 a year.

Who will be affected?

The VAT flat rate scheme changes will mainly affect businesses which provide advice of skilled labour such as solicitors, IT contractors and consultants.

A business that is deemed as a “limited cost trader” should apply a new rate of 16.5% to their VAT inclusive turnover to calculate their VAT liability. This new rate as part of the VAT flat rate scheme changes will be the rate used for all businesses deemed as “limited cost trader” except those that are still within the first year since VAT registration as these businesses will still be eligible for the 1% first-year discount.

How Haines Watts Hull can help you with VAT flat rate scheme changes?

If you are currently a user of the flat rate scheme and are now deemed as a “limited cost trader”due to the VAT flat rate scheme changes and are unsure whether the flat rate scheme is still beneficial to your business here at Haines Watts Hull we can help you by undertaking a review of your VAT position and determining whether the flat rate scheme is still suitable for your business.

Alternatively if you have already decided that the flat rate scheme is no longer suitable for your business but are unsure how to prepare your VAT returns under the standard VAT calculation method we can assist you with preparing your VAT returns and also ensure you comply with future regulations such as making tax digital for VAT. Call 01482 598694 or email hull@hwca.com to get the business help and advice you need today.