23 November 2016
The main problem with Autumn Statements and Budget announcements is that hardly any of the ‘bad’ stuff is ever announced.
I sat and watched the Chancellor deliver the Autumn Statement yesterday and was quite impressed with his delivery and the quality of the jokes but, as one of my VAT colleagues said, “It was very quiet on the VAT front except for a small mention on the flat rate scheme”.
Well, that small mention appears to be creating a new class of Vatable businesses called ‘limited cost traders’. A limited cost trader is apparently defined as one that spends less than 2% of its sales on goods (Not services) in an accounting period. It is believed that the definition of goods is restricted to exclude capital goods, food, drink and vehicles or parts for vehicles. It is also suggested that a ‘limited cost trader’ will also include a business that spends less than £1,000 a year, even if that is exceeds the 2% limit.
The consequences of being a ‘limited cost trader’ is that, irrespective of what type of business you are, your flat rate scheme rate will be 16.5%, which could be much higher than the business is currently assessed to under its rate by type of business classification.
However, this is all just proposals at the moment as it will need to be debated through the Houses of Parliament before becoming part of the Finance Act 2017, but the suggestion is that this will apply from 1 April 2017. Therefore, if you believe this may affect you please contact myself or your local UHY tax expert.
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