If you’re a Limited Cost Company, there have been some changes to the November 2016 edition of the Flat Rate Scheme. See our Important VAT Flat Rate Scheme changes for Small Business blog post for more information on the November announcement. The new changes include how much VAT you’ll pay as a limited cost company.
From 1st April 2017, the limited cost business rate will come into effect. This is where instead of paying the trade sector flat rate percentage, you would pay a set 16.5%.
Not sure if you’re a limited cost company?
If the amount you spend on relevant goods including VAT is either less than 2% of your VAT flat rate turnover, or greater than 2% of your VAT flat rate turnover but less than £1000 per year, then you’re a limited cost business. You may need to complete this test annually before completing your VAT return if you’re a business whose goods are close to the 2% mark.
If your business has a flat rate turnover of £10,000 a quarter and spends £260 on relevant goods.
This is more than 2% of the flat rate turnover and more than £250 so the rate you need to use is the sector rate for your business.
However, if your business has a flat rate turnover of £10,000 a quarter but it only spends £225 on relevant goods. Then this is more than the 2% of the flat rate turnover but less than the £250, so the rate you need to use would be the 16.5%.
What do I need to do?
Absolutely nothing, we will sort everything for you. However, if you would like more information on this, then please do not hesitate to contact us either for a chat or to organise a meeting if you’re concerned that this may affect your business.
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