June Budget – VAT Flat Rate Scheme
Changes to the VAT Flat Rate Scheme were announced as part of the Budget. The changes to the VAT flat rate scheme were necessitated by the increase in the standard VAT rate of VAT to 20% from 4 January 2011.
The VAT Flat Rate Scheme is a simplified VAT accounting scheme available to small businesses with a turnover of up to £150,000. The £150,000 threshold remains unchanged.
The new rates can be found on HMRC’s website at www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#5a
The recalculated flat rate percentages will be effective from 4 January 2011. The threshold for leaving the scheme will increase from £225,000 to £230,000.
Membership of the flat rate scheme is optional and businesses wishing to leave it may do so at any time. HMRC also has the discretion to agree a retrospective leaving date and have said that they will apply this discretion sympathetically to businesses that wish to leave the scheme as a result of these changes.