Autumn Statement 2016 Changes to the VAT Flat Rate Scheme announced
The flat rate scheme was introduced in 2003 as a measure to help reduce the administrative burden of VAT compliance for small businesses, through simplifying the way in which the VAT return is completed.
Under the scheme, a business simply applies a prescribed percentage (dependent on trade sector) to its gross turnover, in order to determine the VAT payable to HMRC. The relevant percentages have been amended by HMRC on a number of occasions, resulting in a minimal effect to those using the scheme.
The changes announced in the Autumn Statement are the most significant since the schemes inception and will likely result in many businesses paying a noticeably larger amount of VAT than previously.