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Do I stay on Flat rate or move to standing VAT account?


If you would like to discuss your options, contact us and we can go through the pros and cons, it could save you a lot of money!

What’s happening to Flat Rate VAT

Following the Chancellors Autumn Statement, Flat Rate VAT calculation will be changing, effective the 1st April 2017.

The Flat Rate Scheme is used by many Service Sector companies as a way of saving their VAT expense as they pay a smaller VAT rate, e.g. 10% instead of 20%.

The difference effectively becomes extra income as you don’t have to pay the full 20% over to HMRC. 

Example
Sale of £1,000 + VAT (£200) = £1,200
If you are on Flat Rate of 10% you only pay £120 in VAT to HMRC a £80 saving.

So, what’s changing

If your business has a small amount of purchases you will no longer be able to use the Flat Rate applicable to your sector, you will be capped at 16.5%.

Based on the above, you would pay £198.00 to HMRC, saving only £2.00

What HMRC classify as small amount of purchases are less than 2% of your sales.  These purchases, are for good only and do not cover services or assets.  Your Accountancy fees and computers are not included.

If you remain on the flat rate scheme as are classified as small, you could loses our on reclaim VAT and ultimately be paying more VAT to HMRC

Types of business Effected

You may be effected if you work in one of the following sectors, so it worth investigating what is best for you or you will pay more tax than you potentially need too.
- Consultants
- IT Contractors

- Accountancy firm!

 

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B4Bookkeeping Ltd

Tel : 01243 201 401

  3 Lincoln House, Chichester Fields, Tangmere, Chichester, West Sussex, PO20 2FS
Company Reg Number : 9151684. VAT Reg Number: 192 380 988. MLR Reg : 12847995

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