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.
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