Changes to the Flat Rate VAT Scheme
You may have read of the unexpected announcement in the Chancellor of Exchequer’s annual statement on 23 November of changes to flat rate vat, which will impact on many of our flat rate clients. If you are not flat rate vat registered, this does not apply to you.
If the vat on your operational expenses is under £1000 then your current flat rate will no longer apply from 1 April 2017 and would instead be replaced by a rate of 16½%.
At present, on a turnover of say £100000 and vat of 20% of this, many of you pay 12% x £120000 or £14,400, gaining £5600, in the process. At 16½% you would pay £19800, eliminating all but £200 of the gain!
We would recommend from 1 April that you change to standard vat. This requires no action on your part. A quick review of some yearly figures suggests that you will at least recover some £500-600 by doing this, just possibly more.
The only administrative change will be that you will complete our expense record that has a vat column on it; the entries in the bank/cash columns will be unchanged, you simply show the vat content of each entry in the vat column. For this purpose you must have a receipt with a vat number on it to be able to claim back the vat.
We will “roll-out” this form for quarterly periods beginning 1 February, and you will start using the vat column for payments made after 1 April.
The income record is unaffected but it will be even more important from 1 April that you show the income entries by date of receiving the money, not the date of the invoice or time sheet being submitted for payment.
We will let you know if there are any changes to this proposed regulation.