What did you think of the Autumn Statement from our new incumbent Philip Hammond? You may possibly have thought there was not much in it, and you may well be right; lots of information on the OBR forecasts, particularly in view of the recent Brexit vote, confirmation that the previously announced the reduced rate of corporation tax to 17% will go ahead; an increase in the living wage to £7.50 in April 2017. But what we noticed in particular, because it could affect quite a few of our clients, was the changes being introduced to the VAT flat rate scheme.
VAT Flat rate scheme changes
HMRC are to introduce an additional test that will determine the flat rate percentage used by traders. It would seem that HMRC presently consider the benefits obtained by certain businesses to be excessive and not in accord with the intentions of Parliament.
Traders that meet the new definition of a “limited cost trader” will be required to use a fixed rate of 16.5%. This will include traders who are already using the FRS scheme, and many at rates lower than 16.5%.
For some businesses – for example, those who purchase no goods, or who make significant purchases of goods – the outcome of the test will be self-evident. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.
Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.
If you think this will affect you, and you wish to discuss this further, give us a ring on 01670 528416.
And, as it is now coming up to Christmas, it would be foolhardy of us not to remind all our clients who have to file self assessment tax returns, to get their information to us as soon as possible so that we can meet the deadline of 31 January 2017. Otherwise you could get an automatic £100 fee
Finally, and most importantly, we wish all our clients and all visitors to our website, a very wonderful Christmas and every blessing for 2017. Enjoy your festive activities.
