If your company is in a EU country that has adopted vat you’ll be able to choose flat rate vat if you wish to simplify your accounting and also be 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.
If you 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 meet the criteria vat verification put in place by the tax authorities inside your country. In case your business is located in the UK then you can go 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 need not keep an in depth account of your vat figures on your sale or purchase when you would have to do under normal vat circumstances. You will, 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 1st year for firms that opt for this scheme. In case you deal in goods or services that come under different vat rates then you’ll need to apply the top vat rate should you choose go for this scheme.
Thus, if you buy or sell services or goods under reduced vat rates or have to reclaim vat which has already been paid then this scheme wouldn’t be ideal for you. However, if you mostly offer goods or services that involve standard vat rates, do not need to go in for any vat refund, or engage in retail sale then the vat flat rate scheme would be perfect for both you and your business. You can get added time to focus on growing your business rather than spending time on vat calculations while filing your returns would also become simpler.
These rules apply to businesses opting for the scheme in the UK. You will need to check on eu vat rules in case your organization is situated in another eu country. You can join the flat rate vat scheme within your country by studying the rules and filling out the necessary vat form. You will also must find the classification of your services and goods to be able to use the appropriate flat vat rate while billing your customers. You can also leave the scheme to migrate to a different vat scheme by informing the relevant vat authorities prior to making your move.
Even though the system of vat is fairly easy to implement, you will 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 basic and you deal in limited goods or services that come under standard vat rates then you can go in for the flat rate vat scheme to simplify your accounting.