In case your business is in an EU country that has adopted vat then you can opt for flat rate vat if you wish to simplify your accounting and also be away from presenting vat figures in full detail. This scheme enables you to simply calculate a prescribed percentage of your vat inclusive sales as 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 understanding what is vat and foresee problems to maintain detailed vat accounts then you can certainly choose the vat flat rate scheme provided you fulfill the criteria http://vatverification.com set up by the tax authorities inside your country. In case your business is located in Great Britain then you can go for vat flat rate in case your estimated sales turnover in 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 don’t need to 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 not be able to go in for vat reclaim just in case you opt for the flat rate vat scheme. UK also offers a 1% discount scheme for the first year for businesses that choose this scheme. If you happen to offer goods or services that fall under different vat rates then you will need to apply the highest vat rate should you choose opt for this scheme.
Thus, if you purchase 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 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 would be perfect for both you and your business. You could find added time to concentrate on growing your business instead of spending 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 review eu vat rules if your business is located in another eu country. It is possible to join the flat rate vat scheme within your country by studying the rules and filling out the required vat form. You will also need to find out the classification of the services and goods so that you can 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 appropriate vat authorities prior to making your move.
Even though the system of vat is rather easy to implement, you will still require services of expert vat agent or consultant to assist you with vat calculations, vat returns and vat refunds. However, if your business format is kind of 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.