VAT flat rate scheme takes a dive
What’s changed to the VAT flat rate scheme
The advantages of using the VAT flat rate scheme (FRS) are; simplified VAT returns, as most purchases are ignored, and keeping a slice of the VAT collected on behalf of HMRC. That slice will diminish to virtually nothing for many businesses who use the FRS from 1 April 2017.
If you use the FRS and spend less than 2% of your sales income, or less than £1000 per year in total, on goods (excluding motor expenses, capital items and food for staff), you will be affected.Businesses in the service or consultancy sectors are likely to be the hardest hit. If you use the FRS we should discuss how the new rules will affect your profitability, and whether you should remain VAT registered.
Technical note on changes to VAT flat rate scheme