If your company is in a EU country that has adopted vat then you can choose flat rate vat if you want to simplify your accounting and stay away from presenting vat figures in full detail. This scheme enables you to simply calculate a prescribed amount of your vat inclusive sales as the final vat figure without going into intricate sale or purchase details, as it is normally required when you file vat returns.
For those who have a basic problem of understanding what is vat and foresee problems to maintain detailed vat accounts then you can certainly choose the vat flat rate scheme provided you meet the criteria put in place by the tax authorities inside your country. If your organization is situated in the UK then you can certainly go for vat control vat flat rate in case your estimated sales turnover within the next year excluding vat is not over £150,000 or including vat is not over £187,500. You can remain under this scheme until your turnover touches £225,000.
Although you will still have to display the vat amount as part of your vat invoice, you need not keep an in depth account of the vat figures on the sale or purchase when you might need to do under normal vat circumstances. You will, however not be able to go for vat reclaim in case you choose the flat rate vat scheme. UK also offers a 1% discount scheme for the 1st year for businesses that choose this scheme. If you happen to deal in goods or services that come under different vat rates then you’ll have to apply the highest vat rate if you do go for this scheme.
Thus, if you purchase or sell services or goods under reduced vat rates or need to reclaim vat that has already been paid then this scheme would not be suitable for you. However, should you mostly deal in goods or services that entail standard vat rates, do not need to go in for any vat refund, or take part in retail sale then the vat flat rate scheme would be ideal for both you and your business. You can get more time to focus on growing your organization instead of spending time on vat calculations while filing your returns would also become simpler.
These rules apply to businesses choosing the scheme in the United Kingdom. You will have to check on eu vat rules if your organization is located in another eu country. It is possible to join the flat rate vat scheme within your country by studying the rules and completing the required vat form. You will probably need to find out the classification of the services and goods to be able to make use of the appropriate flat vat rate while billing your customers. You may also leave the scheme to migrate to a different vat scheme by informing the relevant vat authorities before making your move.
Although the system of vat is fairly simple to apply, you’ll still require the services of expert vat agent or consultant to assist you with vat calculations, vat returns and vat refunds. However, in case your business format is kind of basic and you deal in limited goods or services that fall under standard vat rates then you can go for the flat rate vat scheme to simplify your accounting.