Flat Rate VAT Changes
You must become VAT registered when your VAT taxable turnover exceeds £85,000 in any 12-month cumulative period.
Most companies account for VAT in the standard way which is by calculating the VAT on sales and purchases and paying the difference to HMRC.
As of the 1st April 2017, there is a new single VAT Flat Rate of 16.5% for businesses that meet the specific criteria of a Limited Cost Trader. Previous April 2017 the flat rate you paid was dependent on the business category. You can not claim VAT back on purchases under the Flat Rate Scheme unless they are a capital asset costing £2,000 or more.
To meet the criteria for the Flat Rate VAT Scheme, you must:
- Be a VAT-registered business
- Your VAT turnover must be £150,000 or less in the next 12 months
What is a Limited Cost Trader?
To be defined as a Limited Cost Trader your:
- VAT inclusive expenditure on goods must be either: LESS THAN 2% of your VAT inclusive turnover in a prescribed accounting period, or GREATER THAN 2% of your VAT inclusive turnover but less than £1000 P/A if prescribed accounting period is one year
- Goods must be exclusively for the purposes of business
To find out more contact Saylavy or find information on the HMRC website