If your business is in an EU country which has adopted vat then you can choose flat rate vat if you wish to simplify your accounting and stay far from presenting vat figures in full 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 is normally required when you file vat returns.
For those who have a basic problem of being aware what is vat and foresee problems in maintaining detailed vat accounts then you can opt for the vat flat rate scheme provided you fulfillthe factors set up by the tax authorities in your country. If your organization is located in Great Britain then you can certainly opt for vat control vat flat rate if your estimated sales turnover within 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 need to display the vat amount as part of your vat invoice, you don’t need to keep an in depth account of your vat figures on the sale or purchase as you would have to do under normal vat circumstances. You’ll, however be unable to go for vat reclaim just in case you opt for the flat rate vat scheme. UK offers a 1% discount scheme for the first year for firms that opt for this scheme. In case you offer services or goods that fall under different vat rates then you’ll need to apply the top vat rate should you choose opt for this scheme.
Thus, if you purchase or sell services or goods under reduced vat rates or need to reclaim vat which has already been paid then this scheme would not be ideal for you. However, if 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 your vat flat rate scheme would be perfect for you and your business. You could find more time to concentrate on growing your organization instead of 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 have to review eu vat rules in case your business is located in another eu country. It is possible to join the flat rate vat scheme in your country by studying the rules and completing the necessary vat form. You will also need to find out 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 appropriate vat authorities prior to making your move.
Although the system of vat is rather 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 kind of simple and you offer limited goods or services that fall under standard vat rates you’ll be able to go in for the flat rate vat scheme to simplify your accounting.