Changes in VAT Flat Rate Scheme

From 1st April 2017, Businesses that are under Flat Rate Scheme and those who intend to be so registered are required to carry a check on themselves if they are Limited Cost Trader. According to the Government, this  is to check the Aggressive abuse of the VAT Flat Rate Scheme.

Limited Cost trader is a situation where 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 £1000 per annum if the prescribed accounting period is one year

They will then be placed on 16.5 VAT rate if the above subsists

In regards to businesses that purchase no goods it is obvious that they will be on 16.5 VAT rate.