If your business is in an EU country that has adopted vat you’ll be able to opt for flat rate vat if you wish to simplify your accounting and also be far 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 is normally required whenever you file vat returns.
If you have a basic problem of understanding what is vat and foresee problems in maintaining detailed vat accounts then you can certainly opt for the vat flat rate scheme provided you meet the criteria vatverification set up by the tax authorities in your country. In case your business is located in Great Britain then you can certainly go for vat flat rate if your estimated sales turnover within the next year excluding vat is not over £150,000 or including vat is not over £187,500. You can remain under this scheme until your turnover touches £225,000.
Even though you will still need to display the vat amount as part of your vat invoice, you need not keep an in depth account of your vat figures on the sale or purchase when you might need to do under normal vat circumstances. You’ll, however be unable to go for vat reclaim in case you choose the flat rate vat scheme. UK offers a 1% discount scheme for the first year for firms that choose this scheme. If you happen to deal in services or goods that come under different vat rates then you will have to apply the top vat rate should you choose opt for this scheme.
Thus, if you buy or sell services or goods under reduced vat rates or have to reclaim vat that has already been paid then this scheme would not be suitable for you. However, should you mostly offer services or goods that involve standard vat rates, don’t need to go in for any vat refund, or engage in retail sale then the vat flat rate scheme would be ideal for you and your business. You can get more time to concentrate on growing your business rather than passing time on vat calculations while filing your returns would also become simpler.
These rules pertain to businesses opting for the scheme in the United Kingdom. You will have to check on eu vat rules if your organization is situated in another eu country. It is possible to join the flat rate vat scheme within your country by checking out the rules and filling out the necessary vat form. You will probably must find the classification of the services and goods so that you can make use of 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 relevant vat authorities before making your move.
Even though the system of vat is rather simple to apply, you’ll still require services of expert vat agent or consultant to help you with vat calculations, vat returns and vat refunds. However, if your business format is kind of basic 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.