Any business that has been adversely affected by the new ‘limited cost trader’ test that was introduced on 1 April 2017, should consider whether it will be more beneficial to leave the VAT Flat Rate Scheme (FRS) and revert to using traditional VAT accounting.
Businesses can leave the FRS at any time by notifying HMRC. To save any additional complications this is usually done at the end of their next VAT accounting period but can be done at any time.
Businesses must also leave the scheme:
Businesses that maintain trading stocks and that leave the FRS, may be able to make a stock adjustment and claim input tax when they leave the scheme. They need to follow the steps set out in HMRC’s guidance to find out how. This will require a stock valuation (but not a formal stock-take).
Businesses that leave the flat rate scheme should also be aware that they are unable to re-join the scheme for at least 12 months.