Flat rate scheme - changes
Improvements to the flat rate scheme, including lower rates and easier administration,
to be implemented on 1 January 2004.
The key changes are:
- Lower rates for all sectors with an average reduction of about 1%.
- A further reduction of 1% off the normal flat rates for businesses in their first
year of VAT registration.
- An online ready reckoner to help businesses and advisers check the benefits of
FRS for themselves.
- Telephone and email applications to make joining easier.
- A revised table of flat rate sectors.
Bad Debt Relief (BDR) - changes
New rules (effective from 11 December 2003) to prevent an avoidance scheme
where businesses assign debts to connected businesses in order to retain any VAT
subsequently paid to them.
The measure announced by the Chancellor closes this avoidance opportunity by
providing that the BDR claimant must adjust his claim if payment for the debt is
subsequently received by an assignee to whom he is connected. The arrangements
applying to assignments made to unconnected third parties are unchanged.
Partial Exemption
Partly exempt businesses (which make both taxable and VAT exempt supplies)
may use either a standard method or a bespoke method to calculate the VAT that they
are entitled to reclaim from Customs. Where a bespoke method gives an unfair or
over-generous result, Customs can not terminate that method unless they have already
prepared a fairer method or negotiated one with the business.
From 1 January 2004 Customs will be able to set an effective date from which
they can correct unfair partial exemption methods.
Tackling VAT losses
A further 450 Customs staff (in addition to the 1000 staff deployed last
year) are to be deployed over the next two years to improve assurance activity (VAT
visits) and recover debts from wilfully non-compliant businesses.
Additional specialist staff will also help to ensure that areas presenting significant
revenue risks are identified and addressed earlier.
VAT compliance is becoming more important than ever.
If you require further information please contact us on 0121 778 4299.
This newsletter is designed to keep readers abreast of
current developments. No liability is accepted for errors, omissions or opinions
it contains or for any reliance placed on this newsletter. This newsletter is intended
for general guidance only. No responsibility for loss occasioned to any person
acting or refraining from action as a result of any material in this publication
can be accepted by the authors or publishers. On any specific matter, reference
should be made to the appropriate advisor.
© Copyright 2003 VATease Ltd
