If your company is in an EU country which has adopted vat then you can choose flat rate vat if you want to simplify your accounting and also be away 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.
For those who 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 fulfillthe factors put in place by the tax authorities in your country. If your organization is situated in Great Britain then you can certainly opt for vat flat rate in case your estimated sales turnover in 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 vat number search 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 your vat figures on the sale or purchase as you might need to do under normal vat circumstances. You will, however be unable to go in for vat reclaim just in case you choose the flat rate vat scheme. UK also offers a 1% discount scheme for the first year for firms that opt for this scheme. If you happen to deal in services or goods 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 need to reclaim vat that has recently been paid then this scheme would not be ideal for you. However, should you mostly offer services or goods that involve standard vat rates, don’t need to have any vat refund, or engage in retail sale then your vat flat rate scheme will be ideal for both you and your business. You could find added time to concentrate on growing your organization instead of passing time on vat calculations while filing your returns would also become simpler.
These rules apply to businesses opting for the scheme in the United Kingdom. You will need to review eu vat rules if your organization is located in another eu country. It is possible to join the flat rate vat scheme in your country by checking out the rules and filling out the necessary vat form. You will also must find the classification of the goods and services so that you can make use of the appropriate flat vat rate while billing your clients. You may 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 simple to apply, you’ll still require 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 fairly 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.