Are you using the VAT Flat Rate Scheme? If so the new rules could affect you!
Depending on whether you fall into or out of the criteria for the given period, will depend on whether you will have to use 16.5% or your normal Flat Rate Scheme percentage. It may be that you will fluctuate between the 16.5% and the normal rate each quarter.
You will be classed as a limited cost business if the amount you spend on relevant goods including VAT is either:
- less than 2% of your VAT flat rate turnover
- greater than 2% of your VAT flat rate turnover but less than £1,000 per year, this is time apportioned, if you prepare quarterly returns the amount is £250
For each period you will need to calculate:-
- your turnover
- the cost of goods, these are purchases which are exclusively used for business use,
There are some types of expenses which cannot be included in the costs these goods include:-
- vehicle costs including fuel, (unless you’re operating in the transport sector using your own, or a leased vehicle)
- food or drink for you or your staff
- capital expenditure
- goods for resale, leasing, letting or hiring out if your main business activity doesn’t ordinarily consist of selling, leasing, letting or hiring out such goods
- goods that you intend to re-sell or hire out, unless selling or hiring is your main business activity
- any services
If you’re a limited cost trader this means that you may pay more VAT than you do on standard accounting. If you would like us to check to make sure the Flat Rate Scheme is still appropriate for you or if you would like further advice please get in touch.