If your business is in a EU country which has adopted vat you’ll be able to choose flat rate vat if you want to simplify your accounting and stay away from presenting vat figures fully detail. This scheme allows 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 is normally required when you file vat returns.
For those who have a basic problem of understanding what is vat and foresee problems in maintaining detailed vat accounts then you can opt for the vat flat rate scheme provided you meet the criteria set up 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 if your estimated sales turnover in the next year excluding vat is not over £150,000 or including vat isn’t over £187,500. It is possible to 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 a detailed account of the vat figures on the sale or purchase as you would have 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 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 need to apply the top vat rate if you do opt for this scheme.
Thus, if you buy or sell goods or services under reduced vat rates or need to reclaim vat which has recently been paid then this scheme wouldn’t be ideal for you. However, should you mostly offer goods or services that involve standard vat rates, don’t need to have 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 added time to focus on growing your business rather than passing time on vat calculations while filing your returns would also become simpler.
These rules apply to businesses opting for the scheme in the United Kingdom. You will need to check on eu vat rules in case your organization 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 required vat form. You will also must find the classification of the services and goods so that you can use the appropriate flat vat rate while billing your clients. You can also leave the scheme to migrate to another vat scheme by informing the appropriate 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 help you with vat calculations, vat returns and vat refunds. However, if your business format is kind of simple and you offer limited goods or services that fall under standard vat rates then you can go for the flat rate vat scheme to simplify your accounting.