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SBCA Chartered Accountants

Chartered Accountants in Preston

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New higher VAT Flat Rate percentage

24th January 2017 by Chris Bond

A new VAT flat rate of 16.5% applies from 1 April 2017 for “limited cost traders”.

This is being introduced as HMRC believe that the current system is being abused by some businesses providing their labour but who have very few costs.

The flat rate scheme was originally introduced as a simplification measure for small business as they merely pay a percentage depending on the type of business to their VAT inclusive turnover. For many businesses this process takes about 5 minutes but in future they may have to add up all the input tax on their expenses and deduct that from the output tax on their sales which will often take a lot longer!

Take for example a training consultant who bills his clients £100,000 a year, £120,000 inclusive of VAT. Using the flat rate scheme he currently pays 12% to HMRC = £14,400.  If the VAT inclusive cost of his goods for the year is less than £2,400 (2%) excluding capital expenditure, food, fuel, vehicle costs then he would have to pay £19,800 to HMRC!  It would almost certainly be beneficial for him to stop using the flat rate scheme.

If you are currently using the VAT flat rate scheme contact us to discuss whether the changes will apply to you.

Advisory fuel rate for company cars

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 December 2016. Where there has been a change the previous rate is shown in brackets.

Engine Size Petrol Diesel

LPG

1400cc or less

 

11p

 

7p

1600cc or less

 

9p  

1401cc to 2000cc

14p (13p)

9p

1601 to 2000cc

 

 

11p

 

Over 2000cc

 

21p (20p)

13p

13p

 

Category iconVAT

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