If your company is in an EU country which has adopted vat you’ll be able to choose flat rate vat if you wish to simplify your accounting and stay 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 whenever you file vat returns.
For those who have a basic problem of understanding what is vat and foresee problems in maintaining detailed vat accounts then you can opt for the vat flat rate scheme provided you meetthe factors put in place by the tax authorities in your country. In case your organization is located in the UK then you can go for vat control vat flat rate in case your estimated sales turnover within the next year excluding vat is not over £150,000 or including vat is not over £187,500. It is possible to remain under this scheme until your turnover touches £225,000.
Even though you will still have to display the vat amount as part of your vat invoice, you need not keep an in depth account of the vat figures on the sale or purchase when you might need 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 choose this scheme. In case you offer goods or services that come under different vat rates then you’ll have to apply the highest vat rate if you do opt for this scheme.
Thus, if you purchase or sell services or goods under reduced vat rates or need to reclaim vat which has recently been paid this scheme would not be ideal for you. However, should you mostly offer services or goods that entail standard vat rates, don’t need to go in for 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 can get more time to concentrate on growing your organization rather than spending time on vat calculations while filing your returns would also become simpler.
These rules apply to businesses choosing the scheme in the United Kingdom. You will have to review eu vat rules in case your organization is located in another eu country. You can join the flat rate vat scheme within your country by checking out the rules and completing the necessary 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 appropriate vat authorities before making your move.
Although 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 simple and you deal in limited goods or services that fall under standard vat rates then you can go for the flat rate vat scheme to simplify your accounting.