If your business is in an EU country that has adopted vat then you can choose flat rate vat if you want to simplify your accounting and stay far from presenting vat figures fully detail. This scheme allows you to simply calculate a prescribed percentage 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 fundamental problem of being aware what is vat and foresee problems to maintain detailed vat accounts then you can certainly opt for the vat flat rate scheme provided you meetthe factors vatverification put in place by the tax authorities in your country. If your business is located in the UK then you can opt for vat flat rate if your estimated sales turnover within 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 in your vat invoice, you don’t need to keep a detailed account of your vat figures on the sale or purchase as you might need to do under normal vat circumstances. You’ll, however be unable to go in 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. If you happen to deal in services or goods that come under different vat rates then you’ll need 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 need to reclaim vat that has recently been paid then this scheme wouldn’t be suitable for you. However, should you mostly deal in goods or services that entail standard vat rates, don’t need to go in for any vat refund, or take part in retail sale then your vat flat rate scheme would be ideal for you and your business. You could find more 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 have to review eu vat rules if your business is located in another eu country. It is possible to join the flat rate vat scheme within your country by checking out the rules and completing the required vat form. You will probably must find out the classification of your services and goods to be able to make use of the appropriate flat vat rate while billing your customers. You can also leave the scheme to migrate to another vat scheme by informing the relevant vat authorities prior to making your move.
Even though the system of vat is rather 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, in case your business format is fairly simple and you offer limited services or goods that fall under standard vat rates you’ll be able to go in for the flat rate vat scheme to simplify your accounting.