From 1st April 2017 there will be a new 16.5% VAT flat rate for businesses with limited costs.
When the VAT Flat Rate Scheme was first introduced its intention was to reduce the burden of paperwork on small businesses. From April 2017 businesses must determine whether they are a limited cost trader. Companies will be classed as a ‘limited cost business’ if their cost of goods is less than either:
- 2% of their turnover. The goods will be exclusively for business purposes but exclude: capital expenditure, food and drinks for staff, vehicles, vehicle parts and fuel
- £,1000 per year
What to do if you fall under the new ‘limited cost business’ flat rate VAT:
- If you are already on the flat rate scheme, you need to check if the new rules apply to you and if they do start using the new rate as from 1st April 2017.
- If your turnover is below the VAT threshold from April 2017 (£85,000) and you don’t expect to go above this moving forward you might need to consider de-registering for VAT.
If you are still unsure whether your business is affected by the new rules, please feel free to contact us for further assistance.