If your company 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 also be away from presenting vat figures fully detail. This scheme enables 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 when you file vat returns.
For those who have a fundamental 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 inside your country. In case your business is located in Great Britain then you can go 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 a detailed account of the vat figures on the sale or purchase as you might need to do under normal vat circumstances. You will, however be unable to go in for vat reclaim just in case you opt for 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 services or goods that fall under different vat rates then you’ll have to apply the top vat rate if you do go 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 this scheme wouldn’t be ideal for you. However, should you mostly offer goods or services that entail standard vat rates, do not need to have any vat refund, or take part in retail sale then the vat flat rate scheme will be perfect for both you and your business. You could find added time to concentrate on growing your organization instead of passing time on vat calculations while filing your returns would also become simpler.
These rules pertain to businesses choosing the scheme in the UK. You will have to check on eu vat rules if your business is located in another eu country. You can join the flat rate vat scheme in your country by checking out the rules and filling out the necessary vat form. You will also need to find out the classification of your goods and services so that you can make use of the appropriate flat vat rate while billing your clients. You may also leave the scheme to migrate to a different vat scheme by informing the relevant vat authorities before making your move.
Even though the system of vat is rather simple to apply, you’ll still require services of an 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 deal in limited services or goods that come under standard vat rates then you can go in for the flat rate vat scheme to simplify your accounting.