At Rawlinsons, we are already starting to see the impact that the Flat Rate VAT scheme changes are having on businesses, particularly consultants.
Changes to the scheme, which came into effect on 1st April 2017, will impact businesses defined as ‘limited cost traders’ (see below), who will have to use a new 16.5% VAT flat rate – affecting consultants who are likely to fall into this category.
Consultants who are registered for the Flat Rate VAT Scheme would be sensible to review their position to ensure they are on the most appropriate VAT rate for their business.
Many consultants may be better off going back to one of the standard VAT schemes. As this change particularly affects consultants who registered for VAT voluntarily when the Flat Rate Scheme was financially advantageous, this group may even find they are better off de-registering altogether under the new rules.
To find out more about how the Flat Rate Scheme changes may impact you, including turnover-based examples of the cost of the new scheme, read our new online fact sheet. Alternatively, you can call the tax team on 01733 568321 to discuss your position.
A limited cost trader is one whose VAT inclusive expenditure on goods is either less than 2% of their VAT inclusive turnover per prescribed accounting period, or greater than 2% of their VAT inclusive turnover but less than £1000 per annum (or proportion of £1000 if accounting period is not one year).