§ Mr. BurnsTo ask the Chancellor of the Exchequer whether a decision has been made on the compensation addition for the flat-rate VAT scheme for farmers; and if he will make a statement.
§ Sir John CopeThe flat rate percentage addition will be set at 4 per cent. It is intended to compensate a flat rate814W farmers for the VAT they spend on purchases, which they cannot reclaim as they are not registered for VAT. There is no restriction on the size of farmer who may qualify for the flat rate scheme. However, as it has been introduced to assist small farmers, a restriction has been written into the scheme to prevent some farmers from making a substantial financial gain. Farmers who would stand to gain £3,000 or more a year over what they would have been able to claim as input tax had they remained registered for VAT will not be able to qualify as flat rate farmers. Small farmers whose annual turnover is £70,000 or less will not be affected by this restriction and it is expected that about 90 per cent. of farmers with a turnover of up to £300,000 will be able to join the scheme if they wish.