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VAT returns that covers both before and after 1 April 2017

The low cost business rate came into force on 1 April 2017. You must split the return into 2 periods with the second period starting 1 April 2017. The test shouldn’t be done for the period before 1 April 2017. The calculation for the second period shouldn’t include any turnover or supplies from the first period.

If a quarterly return ends 30 April 2017 the portion of £1,000 that falls in the second period is £83.

If a quarterly return ends 31 May 2017 the portion of £1,000 that falls in the second period is £166.

Example 1

A business with a quarterly return ending 31 May 2017 has a turnover of £9,000 and relevant goods of £300. The return is split into 2 periods. No test is done for the first period. In the second period the turnover used is the amount received in the final 2 months, £6,000. The relevant goods figure is £200, the amount spent in the last 2 months.

This is more than 2% of the flat rate turnover and more than £166 so the rate they need to use is the sector rate for their business.

Example 2

A business with a quarterly return ending 30 April 2017 has a turnover of £9,000 and relevant goods of £240. The return is split into 2 periods. No test is done for the first period. In the second period the turnover used is the amount received in the final month, £3,000. The relevant goods figure is £80, the amount spent in the last month.

This is more than 2% of the flat rate turnover but less than £83 so the rate they need to use is 16.5%. This rate only applies to the turnover in the second period. The rate they need to use in the first period is the sector rate for their business.

Posted on: April 10 2017
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