The VAT Flat Rate Scheme is welcomed by many small business owners because it simplifies the record keeping and calculation requirements associated with their quarterly VAT bill.
Although the VAT Flat Rate Scheme will continue, as of 1st April, HMRC is introducing a new system which will increase the amount of VAT payable by many businesses using that scheme.
HMRC defines a long list of business types that qualify to use the VAT Flat Rate Scheme, provided they also qualify as limited cost traders. Amongst that list, certain trades will experience a big percentage increase as of 1st April, including the following:
- Retailers (selling food, confectionery, tobacco, newspapers or children’s clothing);
- Food manufacturers (cakes, cookies, ice cream, etc);
- Labour-only trades (electricians, etc);
- Licensed clubs/pubs;
A full list of affected trades is available upon request.
The increased VAT payments will affect your cash-flow and your profit margins.For some small businesses, it may be sensible to de-register from VAT because the savings will no longer justify the cost associated with preparation of the quarterly returns.
If your business uses the VAT Flat Rate Scheme, and your costs represent only a small proportion of that figure, you should speak with one of our advisors to establish how this Scheme, and the imminent changes, affect your business.
Get in touch with David Charles to arrange your initial discussion with one of our Chartered Accountants