The changes to flat rate VAT, that were announced last year, are due to come into effect on 01 April 2017. Thousands of small businesses are facing large rises in the amount of tax they pay Under the current system small businesses charge 20% vat on their sales and pay a percentage of their total sales, including vat, to the Government but are unable to reclaim their input vat, the vat they pay on their purchases. The percentage they pay is between 4% and 14.5% dependent on the sector they operate in. Sectors that are likely to buy more goods for resale pay less, service sector industries pay more. From April 2017 small businesses that spend less than 2% of their total turnover or £1000/year on physical goods will be classed as limited cost businesses and if registered for flat rate VAT will pay the new rate of 16.5%. An illustration of how this will affect small business is to look at a membership organisation, under the current system they charge 20% VAT ON their membership