Changes, that came in on 1st April 2017, to the VAT Flat Rate Scheme (FRS) and have supposedly been introduced to tackle “misuses” of the scheme by some small businesses. The changes mean that now businesses that operate the FRS will now need to determine whether they are a “limited cost trader” (LCT). Those that spend less than £1,000 or 2% of their gross turnover on goods per year will meet this definition and are subject to a higher rate of tax.
HMRC state that they have introduced the changes to tackle misuse of the FRS and concerns that some businesses have been paying less VAT than similar firms that are not part of the scheme.
If you are unsure whether this effects you, what the impact will be on your business or you have other concerns in relation to VAT please contact us via the contact form at our website for peace of mind.