As of 1st April 2017, the Flat Rate Scheme (FRS) changed for the worse. Most people who use the Flat Rate Scheme do so because they save money, because they have few overheads with vat on.

The new system changes whatever business sector % you are using to maximum 16.5%.

The criteria is if you spend less or more than 2% on of your turnover on physical objects for your business, e.g. stock (if you trade), consumables, stationary etc. Excluded from the 2% qualification calculation is:

• All purchases for all services, phone, advertising, professional etc.
• All purchases of assets e.g. equipment, fixtures, plant & machinery, vehicles etc.

Basically if you spend more than 2% of your turnover on goods, you can remain on the current FRS %. If you spend less than 2% of your turnover on goods you have to apply the 16.5%.

TRAP – Each VAT return period is assessed individually, therefore you cannot bulk purchase once a year.