From 1 April 2004, the level of taxable turnover at which a business
is required to register for VAT increases by £2,000 to £58,000.
The level of predicted future turnover at which a business can deregister
also rises by £2,000 to £56,000.
Flat rate scheme
The flat rate scheme was introduced in 2002 to simplify the affairs
of small businesses. It is now available to those with taxable turnover
of up to £150,000, and total turnover of up to £187,500.
A flat rate trader claims no input tax on expenses (except for fixed
assets costing at least £2,000 gross), but accounts for less
than the usual 7/47 on receipts from customers - the lower "flat
rate" depends on the type of business.
To encourage more businesses to register for this scheme, the flat
rates were all reduced from 1 January 2004. This means that a flat
rate trader can still receive the same amount from customers, but
will pay less of it to Customs. There is a further discount for
a trader who is within the first 12 months of VAT registration.
Have you thought about the flat rate scheme?
Annual and cash accounting schemes
These two schemes for small companies are extended from 1 April
2004 by increasing the maximum turnover level for entry from £600,000
to £660,000. Traders within the scheme will not have to leave
until turnover exceeds £825,000. The effect of leaving cash
accounting - having to pay over all the VAT on debtors - will also
be deferred for six months, easing cash flow for the business.
Car dealers can recover the input tax on the purchase of cars to
use as demonstrators. A scale rate will be introduced from a date
to be announced after Royal Assent to the Finance Act (probably
July 2004) to require output tax of up to £140 a year if the
business allows employees to have private use of these demonstrator
Groups of companies
Customs have redefined the conditions of eligibility for group registration.
This is aimed at artificial structures established by VAT-exempt
traders to obtain services without paying VAT on them, but it may
also affect some joint ventures which are purely commercial in nature.
The new rules only allow group registration where the companies
could be consolidated in the same set of group accounts under UK