Changes to the VAT Flat rate scheme
To all our clients that are using the VAT Flat rate scheme, there are some big changes coming into force from April.
If you are a “Low Cost Business” in this case you make “Relevant purchases” worth less than 2% of your flat rate turnover or £1,000 of Relevant Purchases you will have to use a new flat rate of 16.5%
Relevant Purchases include:
Gas and electricity;
Stock for a shop;
Software on disk;
Items used to provide services i.e. hairdressing products by a hairdresser, fuel by a taxi driver.
Items that are not Relevant Purchases are
Vehicle costs including fuel;
Food or drink for staff;
Capital expenditure goods of any value;
Goods for resale, leasing, letting or hiring out if this is not the main business activity;
Goods for disposal as promotional items, gifts or donations;
We would advise all our clients that fall into this category to leave the Flat Rate Scheme immediately and go onto the standard scheme where you would be able to reclaim VAT on services and other “Non-Relevant Purchases”. This is the only available option and failure to do this will result in unnecessary costs