Leaving the VAT flat rate scheme

Readers will be well aware of the significant change that was made to the VAT flat rate scheme (FRS) from 1 April when the limited cost trader rate of 16.5% was introduced. See ‘That simple tax’ (2 March 2017) and ‘Flat rate dilemma’ (12 January 2017).

HMRC promised to notify all FRS-registered traders but my letter (a copy is with the website version of this article) and those of others I have spoken to arrived only on 27 March. It is therefore likely that many of the 400 000 businesses that use the FRS will not yet have appreciated what is happening.

The letter is also not very clear: many small businesses will not immediately grasp that they are likely to be much worse off if the limited cost trader regime applies to them. They should therefore consider whether to leave the scheme – or possibly to deregister altogether...