Following the Thexton Training Ltd case, the treatment of interest received by a business operating the flat rate scheme has changed. Where bank interest paid as a core part of the business activities the interest should be included in the turnover for the flat rate scheme. However, where the interest is received as a passive activity, such as on a current or deposit account it is outside the scope of VAT and should not be included in the turnover for the flat rate scheme.

If you have included bank interest in your turnover subject to the flat rate you can make a claim for refund of the VAT paid within the last four years. Ask one of our VAT experts if you need some assistance with this claim.

Thexton Training Ltd case TC00919 http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5287