VAT 

THE  FLAT RATE  SCHEME

The VAT notice  733  has been re-written  for clarity  This notice now reflects comments made by judges in tax tribunal cases that businesses should be  allowed to  ‘use ordinary English’ in choosing the flat rate category for their trade.

Until the change HM Revenue & Customs has  insisted that all consultants should use  the category ‘management consultants’ (flat rate: 14%), irrespective of which industry  they  are  based in, for example   consultants in health and safety, VAT, marketing, etc. Following the change  those businesses who do not describe themselves as management consultants and do not fit in  specific trade description  are allowed  to choose the category ‘business services not listed elsewhere’ , that is flat rate  12%.

First tier tribunal cases: SLL Subsea Engineering Ltd (TC4256) and Idess Ltd (TC3638) for engineering are  relevant. A mechanical engineer  is not the same as a civil engineer, the  former can now choose the 12% rate , for any business not  defined elsewhere.