VAT Flat Rate Scheme
HMRC have introduced a new VAT flat rate percentage of 16.5%. This is designed to prevent a business with low costs – “a limited cost trader” from using the normal flat rate percentage according to their business sector; this will apply where the VAT inclusive expenditure on “goods” is less than 2% of the trader’s turnover or, if greater, less than £1,000.
Goods must be used exclusively for business purposes but exclude capital expenditure, food or drink for the proprietor of the business or its employees and vehicles and fuel (apart from transport businesses).
Anti-forestalling provisions are in place to prevent invoicing in advance of the higher flat rate becoming applicable.
Draft legislation will be published on 5 December and businesses will have 8 weeks to comment.
For more information, please contact Anne Irvine.