There have been changes to VAT thresholds for the forthcoming tax year and to the VAT Flat Rate Scheme
As your Accountant we will ensure that the relevant VAT rates are applied in your case however, for ease of information we have collated these changes together for you to read and digest. Please don’t hesitate to contact your Crest Plus Accountant on 01244 684700 if you wish to clarify anything.
Changes to the VAT flat rate scheme
The VAT flat rate scheme is a simple scheme that enables small businesses to calculate and pay their VAT based on a flat rate percentage of total takings rather than deducting input tax on purchases and expenses and deducting that total output tax on sales in the period. HMRC believe that the scheme is being abused by certain traders who have minimal costs who charge 20% VAT to their customers and then pay a lower percentage over to HMRC.
The flat rate percentage varies depending on the nature of the trade, ranging from 4% for food retailers up to 14.5% of IT consultants and labour-only construction workers. A new 16.5% rate will apply from 1st April 2017 for businesses spending less than 2% of their turnover or less than £1,000 per year on goods, excluding capital goods, food, vehicles and fuel.