Autumn statement - end of VAT flat rate scheme?

[Sonicboom]

confused

The most interesting line is

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

I think I'm leaving the flat rate scheme. Doing the paperwork looks like less work....

Sorry, why is there more paper work on the standard scheme then on FRS? :S

[eek]

Sorry, why is there more paper work on the standard scheme then on FRS? :S

I need to know what my inputs are and the amount of VAT I paid.

On the flat rate scheme I just look at income received and expenses and just enter the totals.

[VectraMan]

In your future...I see paperwork.

WHS. Not having to keep wodges of receipts makes it worthwhile. And the extra money was a little bit of an undeserved bonus.

Unless you're losing out compared to standard VAT, I can't see any reason to leave the FRS.

[Sonicboom]

I need to know what my inputs are and the amount of VAT I paid.

On the flat rate scheme I just look at income received and expenses and just enter the totals.

Still not with you? Surely if you do you accounting online is will all be calculated automatically?

[TheCyclingProgrammer]

I think I'm leaving the flat rate scheme. Doing the paperwork looks like less work....

Its a choice between more paperwork and costing money in real terms, so I think most people will be leaving the FRS.

[TheCyclingProgrammer]

Surely it's just an end to the easy money. Isn't FRS still going to be easier to operate than traditional VAT?

Easier - yes. But it will cost you actual money. Not just an end to the small profit bonus you made from the scheme before...it will very likely result in a net loss from the scheme.

The advice has always been to come off the FRS if your input VAT costs regularly outweigh your FRS surplus. After this change, that will be most of us.

[TheCyclingProgrammer]

Sorry, why is there more paper work on the standard scheme then on FRS? :S

For starters you're going to need to keep a valid VAT receipt for everything you buy (before any form of receipt or in some cases even a bank statement would have been sufficient).

[minstrel]

Doesn't the new 16.5% FRS % only apply to limited cost traders?

What is a limited cost trader?
A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:

• less than 2% of their VAT inclusive turnover in a prescribed accounting period
• greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000)

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

• capital expenditure
• food or drink for consumption by the flat rate business or its employees
• vehicles, vehicle parts and fuel (except where the business is one that carries out transport services - for example a taxi business - and uses its own or a leased vehicle to carry out those services)

These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.

So if you are a £100k turnover business and buy > £2k of goods you can stay on the old FRS?

https://www.gov.uk/government/publications/tackling-aggressive-abuse-of-the-vat-flat-rate-scheme-technical-note/tackling-aggressive-abuse-of-the-vat-flat-rate-scheme-technical-note

I've just bought £3k of paper I don't need. Does anyone want to buy it off me?

[Maslins]

Still not with you? Surely if you do you accounting online is will all be calculated automatically?

Sort of, yes...but for those on FRS they don't need to worry about whether each purchase had VAT or not when entering onto their books.

I don't get this new rule though, why make a complicated new rule rather than just achieve pretty much the same result by increasing the FRS % on categories like the management consultancy and IT/data processing one?

[eek]

Sort of, yes...but for those on FRS they don't need to worry about whether each purchase had VAT or not when entering onto their books.

I don't get this new rule though, why make a complicated new rule rather than just achieve pretty much the same result by increasing the FRS % on categories like the management consultancy and IT/data processing one?

Because there is a large set of 1-10 employee companies in say the care sector created to take advantage of flat rate VAT and Employer NI relief schemes.

And as with all these things its proving very hard to fix the loopholes without hitting others. And surprise, surprise contractors are caught in the crossfire.