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 stay far from presenting vat figures in full 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 whenever 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 choose the vat flat rate scheme provided you fulfillthe factors vatverification set up by the tax authorities in your country. If your business is situated in the UK then you can go for vat flat rate if your estimated sales turnover in the next year excluding vat isn’t over £150,000 or including vat isn’t 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 don’t need to keep a detailed account of your vat figures on your sale or purchase as you would have to do under normal vat circumstances. You’ll, 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 firms that choose this scheme. In case you deal in goods or services that fall under different vat rates then you will have to apply the highest vat rate if you do opt for this scheme.
Thus, if you purchase or sell goods or services under reduced vat rates or have to reclaim vat that has already been paid then this scheme would not be ideal 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 your vat flat rate scheme will be perfect for you and your business. You could find added time to focus on growing your business rather than spending 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. It is possible to join the flat rate vat scheme in your country by studying the rules and completing the required vat form. You will also need to find the classification of the services and goods to be able to use 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 easy to implement, 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 fairly basic and you offer limited goods or services that come under standard vat rates then you can go in for the flat rate vat scheme to simplify your accounting.