Within the Autumn Statement, delivered on the 23 November 2016, it was announced that a new 16.5- rate will be introduced within the Flat-Rate Scheme aimed at businesses with limited costs. This new percentage will come into effect on 1st April 2017 and will require traders to perform an additional test to confirm if they qualify as a limited cost trader. For these purposes, a limited cost trader will be defined as one whose gross expenditure on goods is either less than 2- of their VAT inclusive turnover for that prescribed accounting period or, for the same period, greater than 2- of VAT inclusive turnover but less than £1000 per annum. In addition, this test must be performed for every prescribed accounting period and if a business meets this criteria they will be required to apply the new Flat-Rate percentage. For clarification on how this test should be applied and how the results may affect how the business accounts for VAT using the Flat-rate Scheme, please seek advice from our free VAT helpline.
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