New VAT Rules
Here at Hurren Accountants, Value Added Tax or VAT is just one of the areas that we specialise in. As well as offering the very best support with VAT returns, we also provide up-to-date advice on the VAT scheme, and the 1st April brought a number of changes that all VAT registered businesses and sole traders should be aware of.
HM Revenue & Customs (HMRC) has now completed their consultations regarding the recently proposed changes to the Flat Rate VAT Scheme. Our team of accountants is here to give you the details that could alter how you calculate your VAT liability for good.
What is the Flat Rate VAT Scheme?
The Flat Rate VAT Scheme offers a simplified route to working out and paying your VAT. Available to limited companies throughout the UK with a turnover of £150,000 or less, the Flat Rate Scheme means you pay a fixed rate of VAT to HMRC. In addition to providing an easier way of calculating your VAT liability, the scheme gives you the means to keep the difference between the amount of VAT you charge to your customers and the amount of VAT paid to HMRC via the fixed rate. The new fixed Flat Rate under the scheme is 16.5%.
The catch? Under the Flat Rate VAT Scheme, you cannot reclaim VAT on purchases. Only certain capital assets worth £2,000 or more can be dealt with outside of the scheme and the VAT reclaimed.
How is the Flat Rate Scheme changing?
From 1st April 2017, businesses with a low cost basis will be labelled as ‘limited cost traders’ if, during an accounting period, they spend less than 2% of their VAT inclusive turnover on goods. Companies will also be classed in this category if they spend more than 2% of their VAT inclusive turnover on goods but less than £1,000 per annum. These changes and the amended classification of limited cost traders will mean an increase for many companies that spend little of their turnover on goods but are labour intensive, such as IT contractors, construction firms and consultants.
Seeking advice from an accountant, like us, will help you make the transition to the new Flat Rate VAT Scheme. Our specialists will help you make sense of the changes and ensure the most efficient, simplistic use of the scheme for your business.
Our services don’t end there; our accountants provide assistance with VAT registration, online VAT filing, accurate VAT payment and rebate calculations, VAT return submissions and EC sales list filing. For further information and advice regarding our VAT returns services, please contact our team direct.