VAT Flat Rate Scheme - Limited cost trader
Changes are being made to the Flat Rate Scheme (FRS) which take effect from 1 April 2017. These changes may mean that the FRS is less attractive to some businesses and this may result in these businesses deciding to no longer operate under the FRS. In some cases where a trader has voluntarily registered for VAT it may be appropriate to deregister from VAT.
A new higher 16.5% rate will apply from 1 April 2017 for businesses with limited costs, such as many labour-only businesses, using the Flat Rate Scheme. Businesses using the FRS, or considering joining the scheme, will need to decide if they are a 'limited cost trader'.
Under the FRS a set percentage, determined by the business trade sector, is applied to the VAT inclusive turnover of the business as a one-off calculation instead of having to identify and record the VAT on each sale and purchase the business makes. The percentage rates are determined according to the trade sector of the business and these generally range from 4% to 14.5%.
A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:
less than 2% of their VAT inclusive turnover in a prescribed accounting period
greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000).
‘Relevant goods’, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:
capital expenditure
food or drink for consumption by the flat rate business or its employees
vehicles, vehicle parts and fuel, except where the business is one that carries out transport services, for example a taxi business, and uses its own or a leased vehicle to carry out those services
payment for services, as these are not goods, this would include rent, accountancy fees, advertising costs etc
Examples of qualifying ‘relevant goods’ include stationery (and other office supplies), gas, electricity and cleaning products, but only where these are used exclusively for the business.
Businesses using the FRS will need to ensure that, for each VAT return period, they use the appropriate flat rate percentage, so the check to see whether a business is a limited cost trader will have to be carried out for each VAT return.
These rules come into force from 1 April 2017, so where a business has a VAT period that straddles 1 April 2017, the test to determine whether the business is a ‘limited cost trader’ will only apply to the period from 1 April 2017.
Please contact us if you would like advice on the FRS.
Internet link: GOV.UK VAT notice 733

Deadline for 'paper' self assessment tax returns
For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2016/17 return is 31 October 2017. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.
If you would like any help with the completion of your return please do get in touch.

HMRC phishing and scam advice
HMRC have updated their list of examples of websites, emails, letters, text messages and phone calls used by scammers and fraudsters to obtain individual’s personal information.
The guidance can be used to help you decide if a contact from HMRC is genuine, this guidance provides examples of the different methods that fraudsters use to get individuals to disclose personal information.
You can also read about how to recognise genuine contact from HMRC, and how to tell when an email is phishing/bogus.
Internet link: GOV.UK phishing-and-bogus-emails-HMRC

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