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VAT Flat Rate Scheme Update

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    VAT Flat Rate Scheme Update

    Hey kids. HMRC have updated their guidance around the Flat Rate Changes. As I'm such a nice chap, I've cut and pasted the relevant sections:

    Limited cost businesses
    These changes take effect on 1 April 2017. You shouldn’t use the limited cost business rate before this date.

    If you’re a limited cost business, you should use the flat rate of 16.5%. There’s a simple calculator available to help businesses work out whether they’re a limited cost business – if you want to use the calculator, see the VAT Flat Rate Scheme - How much you pay page

    Before you start you’ll need some basic information – use the information that relates to your most recent VAT return period. If you submit quarterly returns this will cover a 3 month period. If you submit annual returns this will cover a full year. You’ll need to know:

    your relevant turnover – this is explained in section 6
    the cost of goods – goods must be used exclusively for the purpose of your business and certain goods are excluded from this test, this is explained in section 4.6
    You’re a limited cost business if the amount you spend on relevant goods including VAT is either:

    less than 2% of your VAT flat rate turnover
    greater than 2% of your VAT flat rate turnover but less than £1000 per year
    If your return is less than one year the figure is the relevant proportion of £1000. For a quarterly return this is £250.

    For some businesses this will be clear, other businesses – particularly those whose goods are close to 2% – may need to complete this test each time they complete their VAT return. This is because you can move from a limited cost rate of 16.5% in one period to your relevant sector rate in another. This would happen if your costs fluctuate above and below 2%.

    If you’re a limited cost trader this means that you may pay more VAT than you do on standard accounting – you may want to check to make sure the Flat Rate Scheme is still right for you.

    Example 1
    A business has a flat rate turnover of £10,000 a quarter. It spends £260 on relevant goods.

    This is more than 2% of the flat rate turnover and more than £250 so the rate they need to use is the sector rate for their business.

    Example 2
    A business has a flat rate turnover of £20,000 a quarter. It spends £325 on relevant goods.

    This is more than £250 but less than 2% of the flat rate turnover so the rate they need to use is 16.5%.

    Example 3
    A business has a flat rate turnover of £10,000 a quarter. It spends £225 on relevant goods.

    This is more than 2% of the flat rate turnover but less than £250 so the rate they need to use is 16.5%.
    Nothing more than clarification really.

    #2
    Originally posted by Alan @ BroomeAffinity View Post
    Hey kids. HMRC have updated their guidance around the Flat Rate Changes. As I'm such a nice chap, I've cut and pasted the relevant sections:
    .
    A really really nice chap would summarise it for us. Just saying.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      Thanks Alan; does VAT only ever refer to purchases or could a company car or hotels be considered for VAT schemes?
      The greatest trick the devil ever pulled was convincing the world that he didn't exist

      Comment


        #4
        Originally posted by LondonManc View Post
        Thanks Alan; does VAT only ever refer to purchases or could a company car or hotels be considered for VAT schemes?
        Specified exclusions:

        vehicle costs including fuel, unless you’re operating in the transport sector using your own, or a leased vehicle
        food or drink for you or your staff
        capital expenditure goods of any value, see paragraph 15.1
        goods for resale, leasing, letting or hiring out if your main business activity doesn’t ordinarily consist of selling, leasing, letting or hiring out such goods
        goods that you intend to re-sell or hire out, unless selling or hiring is your main business activity
        any services

        Comment


          #5
          Originally posted by northernladuk View Post
          A really really nice chap would summarise it for us. Just saying.
          You're all royally f*****. Again.

          Comment


            #6
            Do you still get a 1% discount in your first year of VAT registration if you still use FRS?
            First they ignore you, then they laugh at you, then they fight you, then you win. But Gandhi never had to deal with HMRC

            Comment


              #7
              Originally posted by Alan @ BroomeAffinity View Post
              You're all royally f*****. Again.
              I think we are getting used to that feeling nowadays
              'CUK forum personality of 2011 - Winner - Yes really!!!!

              Comment


                #8
                Originally posted by RonBW View Post
                Do you still get a 1% discount in your first year of VAT registration if you still use FRS?
                Yes, you do. I had a notion that they may have withdrawn this for low cost traders, but it seems not.

                Comment


                  #9
                  Time to buy some stamps and stationary...
                  http://www.cih.org/news-article/disp...housing_market

                  Comment


                    #10
                    Originally posted by Alan @ BroomeAffinity View Post
                    You're all royally f*****. Again.
                    I always wanted to be royally famous. Nice to have it happen a second time.

                    Comment

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