VAT flat rate scheme guidance has been updated by HMRC. The information relates to the operation of the VAT Flat Rate Scheme. This allows taxpayers to calculate the VAT payable by applying a flat rate percentage to their VAT inclusive turnover, rather than netting off output and input VAT due on sales and purchases.
Chartered accountants in Stockport, IN Accountancy, say that the revision in the guidance follows a number of unsuccessful visits to the First Tier Tribunal (FTT). HMRC has issued a revised version of VAT notice 733 Flat Rate Scheme in line with FTT decisions.
The previous version of the notice listed a number of trades and professions (at paragraph 4.4 of the guidance) and indicated the relevant sectors and percentages that these types of business should choose. These had a higher percentage than the 12% rate which applies to ‘business services not listed elsewhere’.
Use ordinary English guidance
The FTT was critical of HMRC in their rigid interpretation of their own guidance. Although this section of the guidance has not been removed, taxpayers are now advised to ‘use ordinary English’ and choose the sector which ‘most closely describes what your business will be doing in the coming year’. The new guidance confirms that HMRC will not change a business’s choice of sector retrospectively as long as the choice was reasonable.
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Internet link: VAT Notice 733