The Spring Budget 2017 and the Flat Rate Scheme

March 16 2017, 0 Comments

There has been a lot of publicity regarding the March 2017 budget regarding class 4 National Insurance contributions but very little regarding changes to the Flat Rate Scheme and limited cost businesses.

Flat Rate Scheme

We are aware at that a large number of our Startup+VAT and Suite customers are management consultants and maybe affected by this change.  So below is a brief overview of the changes in legislation:

Flat Rate Scheme (FRS):

  • From 1st April 2017 businesses eligible to use the FRS but are classified as ‘limited cost’ businesses, will have to account for VAT at 16.5% of their relevant gross turnover.
  • A ‘limited cost’ business is one which spends the following on relevant goods:  

      • Less than 2% of its VAT flat rate turnover, or
      • Greater than 2% of its VAT flat rate turnover but less than £1,000 per year

    Relevant goods are those which are used exclusively for business purposes, but exclude the following:

      • Capital expenditure goods of any value
      • Goods for re-selling or hiring out (unless selling and hiring is the main business activity)
      • Food and drink for the business or its staff
      • Vehicle costs including fuel (unless the business is operating in the transport sector using its own, or a leased vehicle)
      • Goods for resale, leasing, letting or hiring out (if the main business activity is not ordinarily selling, leasing, letting or hiring out of such goods)

        Notice 733   Flat rate scheme for small businesses provides guidance on this.

    Other general VAT news that you may have missed:

  • Registration: From 1st April 2017 the taxable turnover threshold increases from £83,000 to £85,000 per annum before you have to register for VAT
  • De-registration: From 1st April 2017 the threshold increases from £81,000 to £83,000 for de-registration

    Oh... And the Dividend Allowance:

    From 6 April 2018 the tax free dividend allowance (introduced in April 2016) is to be reduced from £5,000 to £2,000


    If you have any questions on how this can be implemented in our packages please email

    *All articles are correct at the time of publication. Please see this link for more information regarding current VAT, Tax and MTD requirements with HMRC. It’s always advisable to check legislations and obligations with the relevant governing body.