Change to flat rate scheme VAT reporting
HMRC has confirmed that the reporting requirements under the VAT flat rate scheme are due to change in June
From 1 June 2022, businesses registered under the flat rate scheme should no longer include imports accounted for under postponed VAT accounting within their flat rate turnover. Businesses will still have to complete a flat rate scheme calculation and also record the VAT due on any imports. The value of import VAT should be included in box 1 on VAT returns.
The correct treatment under the legislation excludes the value of imported goods from the flat rate scheme calculation.
The scheme is for businesses with a turnover of no more than £150,000 a year, excluding VAT. There are some additional rules to stop abuse of the scheme.
Businesses will cease to be eligible to use the scheme if the total value of their income for the year ending is more than £230,000. However, if HMRC is satisfied that the total value of income in the next 12 months will not exceed £191,500, companies may be eligible to remain in the scheme.
If a company is part of a VAT group, or are eligible to join an existing VAT group, then it cannot use the flat rate scheme.
Postponed VAT accounting was introduced on 1 January 2021 and allows UK VAT registered businesses to declare and recover import VAT on the same return, rather than having to pay it upfront when the goods are imported and recover it later.
Story by Sara White from Accountancy Daily