Important VAT Flat Rate Scheme changes for Small Businesses
Does your business use the VAT (Value Added Tax) Flat Rate Scheme and spend little on raw materials? If so, the change to the VAT Flat Rate Scheme that was announced in the Autumn statement will affect you.
What happens now and what’s changing?
Currently, the VAT Flat Rate Scheme is an incentive from the government used to simplify taxes and potentially earn you money. An example of how the VAT Flat Rate Scheme currently works is: you charge 20% VAT on your invoices, however, pay a lower rate of tax to HMRC of between 4% and 14.5% (rate varies dependent on type of business). This means the difference between the rate of tax you pay to HMRC and the 20% VAT you charge on your invoices is additional income. This scheme, however, is only open to those who have low stock and low VAT chargeable expenses.
In the Autumn Statement 2016, it was announced that businesses with a very low cost base will now be called “limited cost traders”. This is defined as a business which within the accountancy period spends less than 2% of its sales on goods. However, this cannot include capital goods, food and drink, or vehicles. These businesses can still use the VAT Flat Rate Scheme, but the percentage has risen to 16.5%. Although the percentage has risen, this could still potentially earn you money.
What do I have to do? And how can Franks Accountants help me?
This will be coming into effect from April 2017, but could affect goods bought from now. If you’re with Franks Accountants, we will do everything for you, including ensuring you’re paying the right amount of VAT. This means you won’t get unexpected charges at the end of the year. Therefore, you don’t have to do anything.
If you have any concerns about these tax changes, would like more information, or have questions you need answering, don’t hesitate to contact us. We can talk through the changes with you, ensuring you understand the new VAT Flat Rate scheme, including how much VAT you will be paying after the change. Alternatively, if this scheme will no longer benefit your business, we will talk through alternative methods with you. We will ensure to keep you and your business the focus, and do the best for you.
If you’re not already with Franks Accountants, make sure you seek advice, or call us for your free no obligation consultation. We will happily meet you at either of our Wetherby, Harrogate or York offices, or at a location of your choice. Make sure you don’t delay, as we could save you money!
For more information on how our Accounts and Tax service works please see here.