If your company is in an EU country which has adopted vat you’ll be able to opt for flat rate vat if you wish to simplify your accounting and stay away from presenting vat figures in full detail. This scheme enables you to simply calculate a prescribed amount of your vat inclusive sales as the final vat figure without going into intricate sale or purchase details, as it is normally required when you file vat returns.
If you have a fundamental 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 meet the criteria put in place by the tax authorities in your country. If your organization is located in Great Britain then you can go for vat flat rate if 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 vatnumbersearch touches £225,000.
Even though you will still have to display the vat amount as part of your vat invoice, you don’t need to keep a detailed account of the vat figures on your sale or purchase when you might need to do under normal vat circumstances. You’ll, however not be able 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 firms that opt for this scheme. If you happen to offer goods or services that come under different vat rates then you’ll 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 goods or services that entail standard vat rates, do not need to go in for any vat refund, or engage in retail sale then the vat flat rate scheme will be ideal for both you and your business. You can get added time to focus on growing your organization 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 review eu vat rules in case 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 completing the necessary vat form. You will probably must find out the classification of the goods and services 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 another vat scheme by informing the appropriate vat authorities prior to making your move.
Even though the system of vat is fairly 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, in case your business format is fairly basic and you deal in limited services or goods that come under standard vat rates then you can go for the flat rate vat scheme to simplify your accounting.