In case your business is in a EU country which has adopted vat you’ll be able to choose flat rate vat if you want to simplify your accounting and stay far 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.
If you have a fundamental problem of being aware what is vat and foresee problems to maintain detailed vat accounts then you can certainly choose the vat flat rate scheme provided you meetthe factors put in place by the tax authorities inside your country. If your organization is located in the UK then you can certainly opt for vat flat rate if your estimated sales turnover within the next year excluding vat is not over £150,000 or including vat is not over £187,500. You can 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 an in depth account of the vat figures on the sale or purchase as you would have 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 offers a 1% discount scheme for the first year for businesses that opt for this scheme. In case you deal in goods or services that come under different vat rates then you will have to apply the top vat rate if you do go 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 this scheme wouldn’t 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 perfect for you and your business. You could find 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 pertain to businesses choosing the scheme in the United Kingdom. You will have to check on eu vat rules in case your organization is located in another eu country. It is possible to join the flat rate vat scheme in your country by studying the rules and filling out the required vat form. You will also 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 clients. You can 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 rather simple to apply, you will still require services of an expert vat agent or consultant to assist you with vat calculations, vat returns and vat refunds. However, in case your business format is kind of simple and you offer limited services or goods that fall under standard vat rates you’ll be able to go for the flat rate vat scheme to simplify your accounting.