From 1 April 2017, eligible businesses with ‘limited cost’ will have to account for VAT at 16.5% instead of the agreed existing Flat Rate. This % will be applied to the gross turnover (inclusive of VAT), in the same way we do under the FR scheme.
So, which businesses are classed as having ‘limited cost’? First you need to understand the meaning of the ‘Relevant Goods’
Relevant Goods simply mean those which are exclusively used for business. But these exclude any subsistence, long term assets purchases, motor vehicles and fuel costs.
Limited Cost business spends less than 2% of its flat rate turnover. This will also apply if the spends are less than £1,000/year. see more information at:
https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses
