It would appear that if rates under VAT FRS remain the same then many small businesses will lose out.
Consider a business with a turnover of £150,000 and a rate of 13%.
Before the change, total income is £176,250. VAT is £22,912-50 and therefore net income is £153,337-50
Now the total income is £172,500. VAT is £22,425 and therefore the net income is £150,075.
A net reduction in income of £3,262-50 per annum.
Simon H
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Vat Guide
Is anyone else having problem trying to download the VAT Guide 2008 I can only get page 1 to 4?
Less benefit - invoice now !
If you were previously a beneficiary under the FRS, that benefit has now gone down - see my posting in another item.
If you were on 13%, now down to 11.5%, your income on the differential between full rate and flat rate is down by 20% with effect from 1st Dec - so get those invoices in before then !!
Worth Noting
that not all VAT flat rates have reduced and most by less than the 2.5% reduction.
This accounts for (a) some rates which should have gone up under the old 17.5% rules (we are told) and (b) for the fact that under the flat rate scheme only the net VAT (ie output less input tax) is accounted for, so you wouldn't expect the full reduction to show up.
Businesses using the flat rate scheme will still have to ascertain the taxpoint for the supplies they make in order to establish the VAT due on the supply.