Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether she plans to review the Flat Rate Scheme rules to enable small hospitality businesses to recover VAT on essential inputs.

The Flat Rate Scheme aims to offer additional simplification to smaller businesses. It allows VAT to be calculated by the application of a sector-specific percentage. Users benefit by not having to account for VAT on sales and costs, instead applying a lower rate than the 20% Standard Rate of VAT.

These percentages reflect average ratios of VAT on sales and purchases for registered businesses in each sector. They vary between 4% and 16.5% to account for the different levels of normal input tax recovery. This includes the 10.5% hospitality rate.

Additionally, the Scheme allows businesses to recover VAT on the purchase of larger capital items.

We keep all taxes under review and make changes at Budget in the context of the overall public finances.