If your company has reached the VAT threshold, then you are required by law to register for VAT. If this is the case, then you are also required to prepare and submit the quarterly VAT return. We Helps clients in VAT registration, preparation of VAT returns. Clients who are not VAT registered, we will notify them when they are legally obliged to register for the VAT and when to submit it.
When we compile the data for the VAT returns we not only do the bookkeeping and prepare the return, but we also ensure that information that have been given to us is accurate. We pay particular attention to ensuring that we are claiming for all VAT your business has incurred, ensuring you pay as little VAT as possible to HMRC.
If your business is a not limited cost trader then you can take advantage of registering your company under flat rate scheme. We advice clients to register under flat rate scheme only if we see there is a potential benefit to them. This limited cost trader defination is designed by HMRC especially for the contractors who were using flat rate scheme and saving money.
From 1st April 2017, so-called ‘limited cost traders’ will use a new 16.5% rate when calculating their FRS liabilities. All other businesses will continue to use the current percentages used by HMRC. So, limited company contractors who meet the definition of limited cost traders will be liable to pay hundreds, if not thousands of pounds in additional VAT liabilities each year.
According to the HMRC technical note (and confirmed in VAT Notice 733), this is defined as a business which has a VAT-inclusive expenditure on relevant goods of either:
To prevent businesses incorporating everyday purchases to increase their costs above the 2% threshold, the following items must be excluded when working out whether or not your business is deemed to be a "limited cost" one:
Unfortunately, HMRC have also decided to dis-allow a number of services from its definition of what ‘relevant goods’ are – and, as a result, many contractor companies will fit the description of a ‘limited company trader’ despite purchasing significant services, including:
You can work out if you are likely to be a ‘limited cost trader’ by using this HMRC Flat Rate VAT calculator.
Clearly, the tax advantage afforded to many who have used the FRS will no longer be available if you are indeed a ‘limited cost trader’ – this is the whole point of the legislation.
There are a number of things to consider here if your business is affected by this new rule:
To prevent businesses invoicing in advance or taking other measures to avoid meeting the Government’s definition of a limited cost trader, anti-forestalling legislation was also published on 23rd November.
The Government published an extensive guide to the new Flat Rate VAT rules at the end of February 2017.