VAT Flat Rate Scheme – changes are coming…
There are key changes to the VAT flat rates scheme coming in to force from 1 June 2022. The changes will apply to small businesses using the scheme, which are importing goods and using postponed VAT accounting.
What is the Vat Flat Rate Scheme?
The amount of VAT a business pays or claims back from HM Revenue and Customs (HMRC) is usually the difference between the VAT charged by the business to customers and the VAT the business pays on their own purchases.
With the Flat Rate Scheme:
- you pay a fixed rate of VAT to HMRC
- you keep the difference between what you charge your customers and pay to HMRC
- you cannot reclaim the VAT on your purchases - except for certain capital assets over £2,000
What are the changes to the VAT Flat Rate Scheme from June 1?
If you’re using the Flat Rate Scheme and are accounting for import VAT on your VAT return, for return periods starting before 1 June 2022, you must add the value of the imported goods to the total of all your supplies, before you do the scheme calculation.
Also for return periods starting on or after 1 June 2022, you should not include import VAT accounted for using postponed VAT accounting in your flat rate turnover. The VAT due on any imports should be added to box 1 of the return after you have completed your flat rate scheme calculation.
Find more information about working out the VAT due on sales in VAT Notice 700/12, section 4.1.
Are there penalties?
HMRC says that as long as you take reasonable care to follow the guidance, there will be no penalty for errors.
If you have any questions please do get in touch with your Swindells’ partner who will be able to advise you further.
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