VAT Flat Rate Scheme

From 1 April 2017, HMRC are introducing a new rate of 16.5% for the Flat Rate Scheme which will have to be used by anyone classified as a low cost trader, regardless of trade sector.

A low cost trader is anyone whose VAT inclusive expenditure on goods is either less than 2% of VAT inclusive turnover or less than £1,000 per annum.  The definition of “Goods” does not include capital expenditure, food or drink consumed by the business or its employees, vehicles, vehicle parts, fuel, rent, software licences, IT support, digitial journals, subcontractors, telecomms, hiring equipment, postage or professional subscriptions.

If this rate applies to you, it is likely to make the flat rate scheme unattractive and you should consider whether to come off the scheme.