Lambert Chapman LLP's Richard Hamilton looks at forthcoming changes to the VAT flat rate scheme

It has been well publicised that the Government are reverting back to the 17.5% standard VAT rate from 1 January 2010.

However, there are also changes to the flat rate scheme for VAT on this date which will affect a number of our clients.

Businesses using the Flat Rate Scheme apply a flat rate percentage to their turnover to arrive at their VAT liability. The rate used is dependent upon the business sector and is set by reference to net VAT payable by businesses in each sector.

The flat rates were recalculated in 2008 to take account of the reduction in the standard rate of VAT and to provide a more up to date reflection of net VAT liabilities in each sector. They now need to be amended again to reflect the reversion of the standard rate to 17.5%.

For example, a business involved in estate agency or property management services would currently be applying a flat rate percentage of 9.5% to their turnover. From 1 January 2010, this rate will need to be increased to 10.5%.

It is important to recognise the changes as if the wrong percentage is applied, then H M Revenue & Customs may demand that any amounts underpaid are settled once the error has been identified.

The link below will direct you to the revised flat rate percentages on the H M Revenue & Customs website and it is advised that you check whether the percentage appropriate to you business is due to change.

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

If you have any queries regarding the flat rate scheme for VAT, please contact Richard Hamilton on 01376 326266 or e-mail him at richard.hamilton@lambert-chapman.co.uk

 

Date:22 December 2009

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