The Chancellor’s Autumn Statement had a hidden sting in the tail for the growing numbers of self employed traders in the UK who may need to keep a close eye on things if they are VAT registered.
Everyone who has been self-employed for a length of time will be familiar with the extra charge on goods and services known as VAT. Claiming back VAT is a way to reduce the overall costs of purchases related to the business but it involved lots of detailed record keeping. This was seen by the government as a burden on small business, so in an effort to reduce this burden they have come up with the Flat Rate VAT scheme.
The introduction of the scheme means that smaller firms will pay a percentage of their sales revenue to HMRC rather than calculate what has been collected with VAT then deducting the VAT claimed for expenses.
The new scheme will apply to smaller businesses from April 2017, the start of the new tax year and it will be set at a flat rate of 16.5%. The move is unlikely to be welcomed by some types of businesses who will lose out on some of the benefits they enjoyed before.
If you are concerned about how the flat rate VAT will affect your business, please give us a call.