VAT Flat Rate Scheme: How will the changes affect you?

There are important changes to accounting for VAT that come into force from 1 June 2022. This will apply to small businesses using the Flat Rate Scheme who are importing goods and using postponed VAT accounting.

What is the Flat Rate Scheme?

The amount a business pays or claims back is usually the difference between the Value Added Tax (VAT) charged to your customers and the amount your business pays to Her Majesty’s Revenue and Customs (HMRC). They have issued the following updated guidance here.

How does it work currently?

Those businesses using the Flat Rate Scheme must currently add the value of imported goods to the total of all their supplies before they carry out the scheme calculation.

What happens after June 1st?

For VAT return periods starting on or after 1 June 2022, businesses should no longer include import VAT accounted for using postponed VAT accounting in their flat rate turnover. The VAT due on any imports should be added to box 1 of the return after completing the Flat Rate Scheme calculation.

What if I am not using the VAT Flat Rate Scheme?

HMRC have also updated their guidance for VAT registered importers not using the Flat Rate Scheme, which can be found here.

HMRC say that you must account for postponed import VAT on you VAT returns for the accounting period which covers the date they imported the goods. The normal rules apply for what VAT can be reclaimed as input tax. The trader’s monthly statement will contain the information to support their claim.

What if I cannot access my monthly VAT statements?

HMRC is aware of the problems some importers are having when trying to access their monthly VAT statements. If you cannot access your statement or you’re having problems when viewing your statement, you should follow the guidance on how to complete a VAT Return if you’re having problems with your monthly statements.

Will I incur penalties if I make errors?

Reassuringly, HMRC say that as long as you take reasonable care to follow the guidance, there will be no penalty for errors.

Get in touch

For more information around this complex issue, please speak to a member of our Business services team or call us on 01903 234094.