VAT Flat Rate changes January 2010
Many people seem to be assuming that when the VAT rate reverts to 17.5% on 1st January 2010, the VAT Flat Rates will also revert back to their pre December 2008 rates. HMRC have said this is not the case and a number of changes to the rates. An announcement will be made during December, probably at the time of the pre budget review.
The Flat Rate Scheme is supposed to be revenue neutral. Essentially winners and losers should cancel each other out. It was felt that for some trades the rates were a little generous so the opportunity will be taken to bring those in line.
For cash businesses, such as shops, the Flat Rate Scheme will remain pretty straightforward but for businesses which issue invoices and operate the Flat Rate scheme life could be a little more complicated, particularly if they also use cash accounting for VAT.
We aren’t great fans of the Flat Rate Scheme. It was helpful when most businesses used a book to record their transactions but bookkeeping software makes it so much easier to calculate VAT and there isn’t often any substantial advantage in using the Flat Rate Scheme.
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Do you mean “when the VAT rate reverts to 17.5% on 1st January 2010″ ? !
Well spotted Wendi. I got it right in the title but made an error in the txt. Thank you.