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VAT: keeping to the rules for the flat rate scheme

Stanley Dencher, specialist tax writer at CCH, outlines the conditions for using the flat rate scheme for VAT, considering various First Tier Tribunal decisions on whether the flat rate scheme was applied in the right circumstances and at the correct rate

VAT reclaimed on capital ‘goods’ not services

Under the flat rate scheme, input tax is generally not deductible, unless it relates to the purchase of capital goods exceeding £2,000 (including VAT).

In the case of March [2009] TC 00062, the taxpayer arranged for the construction of a riding arena and reclaimed VAT on the construction costs. However, HMRC substantially disallowed the claim, because the supply was of construction services, rather than goods.

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