If you are on the Flat Rate VAT Scheme you will need to be aware of the changes to the Scheme as per 1st April 2017.
Below is a short extract of the changes:
The VAT flat rate scheme is used by many small businesses to simplify their VAT accounting. The scheme allows the calculation of VAT based on the VAT inclusive turnover of the business, at a rate which provides for some input tax offset. No input tax is recoverable by the business using the flat rate scheme, but many small businesses can find the flat rate scheme shows them a consistent profit against formal VAT accounting. HMRC has now announced that from 1 April 2017 there will be a new flat rate of 16.5% applying to businesses with very low levels of business expenditure. This will increase the effective rate of VAT paid by these businesses to 19.8%, thus limiting the benefit they gain by operating the flat rate scheme to 0.2% of the value of their supplies.
Businesses will be required to use the new rate if their expenditure in a year is less than 2% of their VAT inclusive supplies, or for businesses with VAT inclusive supplies of less than £50,000, more than 2% but less than £1,000. Expenditure on capital items and motor expenses will be ignored in meeting this threshold.
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