The flat rate scheme (FRS) is adopted by numerous small businesses to simplify their VAT reporting. Effectively as of April 2017, many contractors, consultants and other service providers will lose the cash benefit of the FRS.
A business will be required to use a flat rate of 16.5% instead of the previous 14%.
For example, if you have a turnover of £100,000 plus VAT i.e. £120,000 you are currently charged £16,800 (120,000 x 14%). As of April 2017, this will increase by £3,000 to £19,800 (120,000 x 16.5%).
Businesses who operate the flat rate VAT scheme, will need to review their affairs and make a decision on whether or not to leave the scheme from 1 April 2017. We suspect most contractors, consultants and other service providers will be better off exiting the scheme.
If you have any questions, please feel free to contact Michael Burgess on 01782 279615 who will be happy to help.