Changes to Flat Rate VAT Scheme – Limited Cost Business Rate

Changes to Flat Rate VAT Scheme – Limited Cost Business Rate

New rules from 1 April 2017

You’ll be classed as a ‘limited cost business’ if your goods cost less than either:

  • 2% of your turnover
  • £1,000 a year (if your costs are more than 2%)

This means you’ll pay a higher rate of 16.5%.

If you aren’t a limited cost business, continue to use your business type to work out your flat rate.


Am I a Limited cost business?

There’s a  calculator available to help businesses work out whether they’re a limited cost business – if you want to use the calculator, see the VAT Flat Rate Scheme – How much you pay page

Before you start you’ll need some basic information – use the information that relates to your most recent VAT return period. If you submit quarterly returns this will cover a 3 month period. If you submit annual returns this will cover a full year. You’ll need to know:

  • your relevant turnover –
  • the cost of goods – goods must be used exclusively for the purpose of your business and certain goods are excluded from this test.

You’re a limited cost business if the amount you spend on relevant goods including VAT is either:

  • less than 2% of your VAT flat rate turnover
  • greater than 2% of your VAT flat rate turnover but less than £1000 per year

If your return is less than one year the figure is the relevant proportion of £1000. For a quarterly return this is £250.

For some businesses this will be clear, other businesses –particularly those whose goods are close to 2% – may need to complete this test each time they complete their VAT return. This is because you can move from a limited cost rate of 16.5% in one period to your relevant sector rate in another. This would happen if your costs fluctuate above and below 2%.

If you’re a limited cost trader this means that you may pay more VAT than you do on standard accounting – you may want to check to make sure the Flat Rate Scheme is still right for you.

Example

A business has a flat rate turnover of £10,000 a quarter. It spends £260 on relevant goods.

This is more than 2% of the flat rate turnover and more than £250 so the rate they need to use is the sector rate for their business.

 

More information can be found at Government Flat Rate VAT notice

National living wage

National living wage

National living wage for workers aged 25 and over

The new National Living Wage becomes law in April 2016 for workers aged 25 and over

From 1 April 2016 workers aged 25 and over will be legally entitled to a new minimum pay rate of £7.20 per hour, called the National Living Wage (NLW).

As an employer you’ll need to check which staff are eligible for the new rates and update your payroll in time.


LIVINGWAGE.GOV.UK

Workplace pensions

New requirement for employers

What is automatic enrolment?

Every employer with at least one member of staff now has new duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it. This is called automatic enrolment.

You need to take steps to make sure your eligible staff are enrolled into a pension scheme. If you already pay contributions into a pension scheme for your staff, you will need to check if it is suitable for automatic enrolment.

Ideally, you should allow up to 12 months to prepare. Remember, automatic enrolment is your legal duty and if you don’t act you could be fined.


Know your staging date

The date your automatic enrolment duties start is called your staging date and is when the law comes into effect for you.

If you don’t know your staging date, we can find it using your PAYE reference. If you don’t pay your staff through a PAYE scheme, your staging date will be 1 April 2017.

When the pensions regulator writes, you need to confirm the most senior person or business owner as the ‘primary contact’.

FP Business Services Ltd can help you to carry out the day-to-day tasks of managing automatic enrolment, you can nominate us as a ‘secondary contact’.


Who do you need to enroll?

All your staff must be assessed for automatic enrolment based on their age and how much they earn. Further information is available at

http://www.thepensionsregulator.gov.uk/employers/check-who-you-need-to-enrol.aspx

FP Business Services can help you carry out a full assessment of all your staff when you reach your staging date.

For further information see http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx?campaign=087DWPemployers2014