If your business is in a EU country which has adopted vat then you can opt for flat rate vat if you wish to simplify your accounting and stay away 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 whenever you file vat returns.
For those who have a basic problem of understanding what is vat and foresee problems to maintain detailed vat accounts then you can certainly choose the vat flat rate scheme provided you fulfillthe factors put in place by the tax authorities in your country. In case your organization is located in the UK 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. It is possible to remain under this scheme until your turnover vat number search touches £225,000.
Even though you will still need to display the vat amount in your vat invoice, you need not keep an in depth account of your vat figures on your sale or purchase when you might need to do under normal vat circumstances. You’ll, however not be able 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 businesses that opt for this scheme. If you happen to deal in goods or services that fall under different vat rates then you’ll need to apply the top vat rate if you do go for this scheme.
Thus, if you purchase or sell services or goods under reduced vat rates or need to reclaim vat that has already been paid then this scheme wouldn’t be suitable for you. However, if you mostly deal in goods or services that involve 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 would be perfect for both you and your business. You can get more time to concentrate on growing your organization rather than spending time on vat calculations while filing your returns would also become simpler.
These rules pertain to businesses choosing the scheme in the United Kingdom. You will need to review eu vat rules in case your organization is situated in another eu country. You can join the flat rate vat scheme in your country by studying the rules and filling out the necessary vat form. You will also need to find out the classification of the services and goods so that you can use the appropriate flat vat rate while billing your customers. You may also leave the scheme to migrate to another vat scheme by informing the appropriate vat authorities prior to 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 goods or services that fall under standard vat rates then you can go in for the flat rate vat scheme to simplify your accounting.