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Getting the VAT treatment right

A Sorry Tale of Misunderstanding

There are three rates of VAT:

  • Standard rate of 20%;
  • Reduced rate of 5%; and
  • Zero rate.

There are also exempt supplies which do not attract VAT, but these are not the same as zero-rated supplies.

For the majority of contractors, the VAT treatment of their sales is straightforward enough, but there may…

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Artificial separation of businesses

contractor phone

Splitting hairs

There are some businesses that seek to avoid registering for VAT by separating their business activities so that each businesses turnover falls below the registration threshold.

This situation can occur when dealing with contractor accounting as artificial separation can occur between any business structure. A sole director of a PSC, for example, may decide to provide some of their services as a…

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HMRC Writes to Flat Rate Scheme Traders

flat rate

Warning about the new limited trader rate

HMRC has started writing to all those currently using the flat rate scheme (FRS) due to the introduction of the new 16.5% VAT flat rate applicable to businesses with limited costs, such as labour-only businesses,

The legislation

A limited trader will be defined as one whose VAT inclusive expenditure on goods is either:

  • less than 2%…

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