From 1 April 2017, businesses using the Flat Rate Scheme or joining the scheme will need to decide whether they are a limited cost trader. Businesses that meet the definition of a ‘limited cost trader’ must use the new 16.5% rate under the Flat Rate Scheme.
A limited cost trader will be defined as one whose VAT inclusive expenditure on goods, used exclusively for the purpose of the business, (excluding capital expenditure, subsistence and most vehicle expenditure) 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)
Anti-forestalling legislation has been published and will affect a business that supplies a service on or after 1 April 2017 but either issues an invoice or receives a payment for that supply before 1 April 2017. Any such supply will be treated as taking place on 1 April 2017 for these purposes. Any invoice or payment that covers continuous supplies of services that cross this date must be apportioned.
Insurance Premium Tax – new rates
The standard rate of Insurance Premium Tax will rise from 10% to 12% from 1 June 2017.