Small businesses

VAT Flat Rate Scheme

Small businesses with turnover up to £150,000
can register for the VAT Flat Rate Scheme. This
is a simplification: they claim no input tax on their expenses, but keep some of the output tax they charge to customers in order to compensate for this. The amount they keep depends on the type
of business. Most of those who join the scheme do so because they have calculated that it saves them money – in some cases a considerable amount.
The Government has decided that this constitutes ‘aggressive abuse’, and will negate it from 1 April 2017 by introducing a new at rate of 16.5% for businesses spending less than 2% of their turnover or less than £1,000 per year on goods, excluding capital goods, food, vehicles and fuel. As the output tax collected from customers cannot exceed 16.67% of turnover, any business affected will almost certainly be better off returning to the normal VAT system with effect from that date.

Business rates

Rural rate relief is available to businesses in rural areas with a population of less than 3,000 – for example, the only shop in a village. To remove inconsistency with small business rate relief, rural rate relief will double to 100% from 1 April 2017.

Capital Allowances

From 23 November 2016 to 31 March/5 April 2019, businesses will be entitled to a 100% First Year Allowance (FYA) for the cost of installing electric charge-point equipment for electric vehicles. This measure is intended to complement the 100% FYA available for low CO2 emission vehicles and to encourage their uptake.