Plans to introduce the scheme were announced by chancellor Gordon Brown in his last Budget and a consultation document followed in June.
But so far the plans have met with scepticism with the ICAEW’s Tax Faculty questioning the scheme’s true value. Now the IIT has responded calling the proposals too complicated and unlikely to result in significant savings for small businesses.
‘We think that the accounting procedures are unduly complex,’ the ITT said in its response. ‘Clearly if the scheme is to be attractive the cost savings need to outweigh the risk of having to pay additional tax due to the rough and ready approach that the scheme takes.’
‘Sadly the proposals appear to us to risk increasing costs rather than saving them,’ the ITT said.
With a flat rate scheme, the government believes business would be released from having to account internally for VAT on all their purchases and supplies. Instead they would be allowed to determine their net VAT liability as a percentage of turnover.
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