Many small owner-managed businesses have been availing of the Government’s Flat Rate VAT scheme to cut down on book-keeping and administration and ultimately save time and money.
The Flat Rate scheme allows businesses with a turnover of less than £150,000 per annum to register for VAT and rather than work out the difference between the VAT collected and the VAT you paid, you pay a flat rate to HMRC and keep the rest.
From 1 April this year, many small businesses may find themselves being able to hold onto less. If your business falls into the category of a “limited cost” business, you pay a higher rate of 16.5% across to HMRC; that’s just 3.5% short of the standard VAT rate.
Limited cost businesses are those whose goods cost less than either 2% of your turnover or £1,000 a year (if your costs are more than 2%). For businesses who fall into this category, this means you’ll pay the higher rate of 16.5%.
Business owners operating the scheme should carefully review if the Flat Rate scheme is effective as it once seemed. Now could be the time to look closer at your numbers and what works best for you.
Speak to us and we can run a simple check and confirm how you will affected.