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 Value Added Tax – Flat Rate for Small
Businesses
Businesses registered for VAT with a total turnover of less than £150,000
may be able to take advantage of the flat rate scheme. This allows
businesses to pay to Customs & Excise only a flat rate calculated
on total gross turnover, varying between 2 and 13½ % depending
on the nature of the business, irrespective of the fact that the
VAT invoices issued to customers will show VAT at 17½%.
No VAT input tax deduction is allowed against the flat rate calculation
for calculating payments to the Inland Revenue, but the scheme
is particularly worthwhile for businesses that have a relatively
low rate of allowable input tax.
There can also be a substantial administrative saving, as the
preparation of VAT Returns becomes a simple procedure of making
one calculation based on total turnover for the period concerned.
VAT arising on capital purchases can be claimed back under separate
arrangements.
Please contact one of the partners for further
information on this
link.
New Businesses
Individuals commencing self-employment are required to notify
the Inland Revenue National Insurance Contributions Office within
three months of the end of the month following the commencement
of the self-employed business. Failure to notify within that period
leads to an automatic penalty being applied of £100.
Companies commencing to trade or carry on a business coming within
the corporation tax regime (including previously dormant companies
which commence to trade) are required to give notice to the Inland
Revenue of the commencement of the trade within three months of
the end of the month in which the trade commenced. A penalty of
up to £1,000 can be imposed for failure to notify.
Please contact one of the partners for further
information on this
link.
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