VAT Flat Rate Scheme changes

News, VAT,

From 1st June 2022, the rules around the Flat Rate VAT scheme are changing. Businesses registered within the scheme will no longer include imports accounted for under postponed VAT accounting within their flat rate turnover. They will still have to complete a flat rate scheme calculation and also record the VAT due on any imports. The value of import VAT should be included in box 1 on VAT Returns.

The correct treatment under the legislation excludes the value of imported goods from the flat rate scheme calculation.

The upper turnover limit for the Flat Rate scheme is £150,000 a year, excluding VAT. Businesses who register must follow some additional rules to prevent abuse of the scheme.

If the total value of income for the previous 12 months exceeds £230,000, businesses will have to leave the scheme. If the total value of income in the next 12 months will not exceed £191,500 though, companies may be eligible to remain in the scheme.

Postponed VAT accounting was introduced on 1 January 2021 and allows UK VAT registered businesses to declare and recover import VAT on the same return, rather than having to pay it upfront when the goods are imported and recover it later.

VAT is a complex subject, and decisions around registration and the most suitable scheme should be made carefully. If you’d like to discuss any aspect of your VAT affairs, or whether you should register or potentially deregister, please get in touch.

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