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Testimonials

Flat Rate Scheme Changes

As you may know, HMRC are introducing a new Flat Rate percentage of 16.5%. Businesses which are classed as “Limited Cost Businesses” will be eligible for this new percentage.

A Limited Cost Business is a business whose cost of goods is below 2% of their turnover, or below £1,000 per year. If for example your VAT returns are submitted on a quarterly basis, the relevant proportion for the quarterly return will be £250. Spending on services will not count towards the 2% threshold, nor will items bought for or used by employees, such as food and drink, or vehicle maintenance (unless you are a vehicle hire firm).

The main businesses that the new Flat Rate percentage will apply to will be labour-intensive ones where very little is spent on goods. For example, this may affect IT contractors, consultants, hairdressers and construction workers who supply their labour but the materials are supplied by the contractor.

Additional information regarding the new Flat Rate percentage can be found here 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

If you would like to have a chat regarding this then call me on 0161 974 0735.

Dominic Oliverio – Bookkeeper

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