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 away from presenting vat figures in full 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 is normally required when you file vat returns.
If you have a fundamental 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 meet the criteria set up by the tax authorities inside your country. If your organization is located in the UK then you can certainly vat verification opt for vat flat rate if your estimated sales turnover in the next year excluding vat isn’t over £150,000 or including vat is not over £187,500. It is possible to remain under this scheme until your turnover touches £225,000.
Even though you will still have to display the vat amount in your vat invoice, you don’t need to keep an in depth account of the vat figures on the sale or purchase as you would have to do under normal vat circumstances. You will, however be unable to go for vat reclaim in case you opt for 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 will have to apply the highest vat rate should you choose go 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 deal in 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 will be perfect for you and your business. You can get added time to concentrate on growing your business instead of passing 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 need to review eu vat rules if your business is situated in another eu country. You can join the flat rate vat scheme in your country by checking out the rules and completing the required vat form. You will probably need to find the classification of the goods and services to be able to use the appropriate flat vat rate while billing your clients. You can 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 will still require 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 you’ll be able to go in for the flat rate vat scheme to simplify your accounting.