The Chancellor has announced future changes to the use of the flat rate scheme which he perceived has been abused. This will impact on some businesses in the region and reduce the benefits of using the flat rate scheme.
From 1 April 2017, FRS businesses must also determine whether they meet the definition of a limited cost trader (“LCR”) and, if they do, then a new rate of 16.5% should be used.
A LCR is defined as one whose VAT inclusive expenditure on goods is less than 2% of their VAT inclusive turnover, or where it is over 2% the value is less than £1,000. As well as these calculations there are a number of excluded items and anti-forestalling measures to counter further abuse.
If you believe that you may be affected and you would like to discuss your position in more detail then please contact Nigel Smith.