Government has announced Flat rate VAT changes for Service industry which will come into effect from April-2017.
If company does not spend on goods minimum £1000 if company’s Sales/turnover is up to £50,000 or 2% of the sales above £50,000, then company should use 16.5% flat rate for their business. In this case it won’t be useful to use flat rate VAT for your business.
These goods need to be physical goods. It can include stationary if it is wholly and inclusively used for business and desktop software not digital software, which I have argued with HMRC as we live in digital world and using software or online products to run our business. So they should be classified as goods.
But if you will have any kind of delivery business then you still can use the same Flat rate VAT code which will benefit your company.
For example, if someone earns £30,000 a year then you charge VAT £6000 to your client and under flat rate scheme for transportation/Delivery services you can save £2400 a year. Which is substantial savings for small business.
Your company still will require VAT registration if your turnover is more than £83,000 a year.
from April Flat rate users will have 4 options:
1. Keep using the same Flat rate code as it is. (Becoming delivery company etc.)
2. Use new Flat rate code 16.5%.
3. Use simple income and expenditure difference VAT claim.
4. De-registration from VAT (if turnover is lower than 81,000 a year)
Here is the link from HMRC for further guidance.
HMRC has told they will publish further guidance at the end of this month on Flat rate Scheme topic.
To discuss your situation with OXON Accountancy please call us or drop us an email to book phone appointment for Monday, Tuesday and Friday on our phone number 01235 250011.
OXON ACCOUNTANCY are specialized to deal with contractors and small business accounting. for further advise please contact us