If your company is in a EU country which has adopted vat then you can choose flat rate vat if you want to simplify your accounting and also be far from presenting vat figures fully detail. This scheme allows you to simply calculate a prescribed amount of your vat inclusive sales as being the final vat figure without going into intricate sale or purchase details, as it is normally required when you file vat returns vat registration.
If you have a fundamental problem of being aware what is vat and foresee problems to maintain detailed vat accounts then you can opt for the vat flat rate scheme provided you fulfillthe factors set up by the tax authorities in your country. In case your business is located in the UK then you can opt for vat flat rate in case your estimated sales turnover in 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.
Even though you will still need to display the vat amount as part of your vat invoice, you need not keep an in depth account of your vat figures on your sale or purchase as you would have to do under normal vat circumstances. You will, however be unable to go for vat reclaim just in case you choose the flat rate vat scheme. UK also offers a 1% discount scheme for the 1st year for firms that opt for this scheme. In case you deal in goods or services that fall under different vat rates then you’ll need to apply the top vat rate should you choose opt for this scheme.
Thus, if you purchase or sell goods or services under reduced vat rates or have to reclaim vat that has recently been paid this scheme wouldn’t be suitable for you. However, if you mostly offer services or goods that involve standard vat rates, don’t need to have any vat refund, or engage in retail sale then your vat flat rate scheme would be perfect for you and your business. You can get more time to concentrate on growing your organization rather than passing 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 have to check on eu vat rules in case your business is situated in another eu country. It is possible to join the flat rate vat scheme in your country by checking out the rules and filling out the necessary vat form. You will also must find 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 another vat scheme by informing the relevant vat authorities before making your move vat number.
Although the system of vat is fairly simple to apply, you will still require the services of expert vat agent or consultant to help you with vat calculations, vat returns and vat refunds. However, in case your business format is fairly basic and you deal in limited services or goods that come under standard vat rates you’ll be able to go for the flat rate vat scheme to simplify your accounting.