In case your company is in an EU country which has adopted vat then you can opt for flat rate vat if you want to simplify your accounting and also be away from presenting vat figures in full detail. This scheme enables you to simply calculate a prescribed percentage of your vat inclusive sales as the final vat figure without going into intricate sale or purchase details, as it is normally required whenever you file vat returns.
For those who have a basic problem of being aware what is vat and foresee problems to maintain detailed vat accounts then you can choose the vat flat rate scheme provided you meetthe factors put in place by the tax authorities in your country. If your business is located in Great Britain then you can opt for vat flat rate in case your estimated sales turnover within the next year excluding vat isn’t over £150,000 or including vat is not over £187,500. You can remain under this scheme until your turnover vatnumbersearch touches £225,000.
Although you will still need to display the vat amount as part of your vat invoice, you don’t need to keep a detailed account of your 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 in for vat reclaim in case you opt for the flat rate vat scheme. UK offers a 1% discount scheme for the first year for firms that choose this scheme. In case you deal in goods or services that fall under different vat rates then you’ll have to apply the highest vat rate should you choose go for this scheme.
Thus, if you purchase or sell goods or services under reduced vat rates or have to reclaim vat which has already been paid then this scheme wouldn’t be suitable for you. However, should you mostly offer goods or services that involve standard vat rates, do not need to have any vat refund, or engage in retail sale then the vat flat rate scheme would be perfect for both you and your business. You can get added time to concentrate on growing your business 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 UK. You will need to review eu vat rules if your business is situated in another eu country. You can join the flat rate vat scheme within your country by checking out the rules and completing the necessary vat form. You will also must find out the classification of your 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 appropriate vat authorities before making your move.
Although the system of vat is rather easy to implement, you will still require the services of an expert vat agent or consultant to help you with vat calculations, vat returns and vat refunds. However, in case your business format is kind of simple and you deal in limited services or goods that fall under standard vat rates then you can go for the flat rate vat scheme to simplify your accounting.