As you may have heard, there are changes being made by HMRC to the Flat Rate VAT scheme taking effect on 1st April 2017.

Due to the fact that more businesses have registered for the scheme than the government had originally predicted and they have consequently lost more revenue than forecast, HMRC appear to be encouraging businesses to leave the scheme.

Meant to be a tool to simplify accounting, many businesses have enjoyed ‘profits’ from this scheme and this has lead to the changes and the introduction of the Limited cost trader.

This means that if the VAT incurred on relevant goods is below 2% of gross turnover or amounts in total to less than £1,000, you will not be able to apply the flat rate percentage that has previously been used.

Instead you will have to apply the rate of 16.5% to the gross turnover which effectively means there is no benefit to being on the flat rate scheme other than for simplified accounting (the original idea behind the scheme)

We are actively speaking to our many clients who have been or remain on the Flat rate scheme in the coming days to determine the best way forward and would welcome contact from any businesses who wish to discuss this further.