Post Brexit, we can expect certain changes. Essentially, VAT is a European tax and is levied throughout the European Union and is a key feature of the European single market. After leaving the EU in a political sense, the UK might still remain as a member of the single market with commitment to continue complying with EU VAT law.
VAT meets modern day fiscal requirements and in recent years most developed countries have shifted their fiscal balance, depending less on direct income taxes and more dependency on indirect consumption taxes such as VAT, and this trend is expected to continue. This was in March 2016 when the UK’s Office for Budget Responsibility confirmed that after income tax and national insurance contributions (NICs), VAT remains government’s third largest revenue raiser. In 2016/17 VAT was anticipated to produce £120bn – or 18% of total revenue of the government.
Under the flat rate VAT scheme, VAT charged on a single purchase of capital expenditure goods can be reclaimed if the amount of purchase including the VAT amount is £2,000 or more. These capital expenditure goods are dealt outside the flat rate scheme i.e. the amount corresponding to input tax can be claimed in box 4 of the tax return. On the other hand, if the purchase is more than one or the invoice value is under £2,000 including VAT or it is a service then in such a scenario VAT cannot be claimed and the input tax is taken into account as part of the flat rate percentage calculation.
To have a better understanding of VAT and the applicable VAT rates, it is advisable to contact Property tax advisors to suggest the most appropriate VAT scheme for their business. All businesses might not be eligible for the flat rate VAT scheme.