New Flat Rate VAT scheme % from April 2017

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HMRC are introducing a new flat rate % for ‘limited cost traders’ from April 2017, meaning they will have to use a new flat rate % of 16.5%.

A limited cost trader is defined as any company with total costs of goods purchased being less than 2 % of the company’s VAT inclusive turnover. ‘Goods’ does NOT include capital expenditure on computer equipment, or food & drink consumed by the Director or motor expenses, motor parts or fuel.

This will affect almost all personal service companies and freelance contractors.

However, the flat rate scheme will still generate a small gain for most and also continue to reduce the admin burden for many small companies.