The autumn statement included the decision to introduce a new flat rate of 16.5% for ‘Limited Cost Traders’ (LCTs) from 1 April 2017. These are defined as people who incur costs on goods in a return period of:

• • Less than 2% of their gross turnover; or
  • More than 2% of their gross turnover but less than £1,000 p.a. (or the appropriate proportion of £1,000 for return period of less than a year – £250 for a standard quarterly return)

This limit is to be considered separately for each return period. Those within the definition will be responsible for using the new 16.5% rate or the trade-related rate as appropriate.

Goods for the purposes of this measure must be exclusively used for the purpose of the business but exclude the following items:

• • • Capital expenditure goods
    • Food or drink for consumption by the flat rate business or its employees
    • Vehicle, vehicle parts and fuel; and
    • Anything that is not used exclusively for the business purposes.

It will affect contractors, freelancers and micro-businesses who predominantly provide a service rather than goods – including consultants, accountants, writers, dog walkers, builders, hairdressers and photographers.