In case your company is in a EU country that has adopted vat you’ll be able to choose flat rate vat if you want to simplify your accounting and also be 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 whenever you file vat returns.
For those who have a basic problem of understanding what is vat and foresee problems to maintain 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. In case your organization is located in the UK then you can certainly opt for vatcontrol vat flat rate if your estimated sales turnover in the next year excluding vat isn’t over £150,000 or including vat isn’t 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 a detailed 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 for vat reclaim just 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. If you happen to deal in services or goods that fall under different vat rates then you will have to apply the highest vat rate should you choose go for this scheme.
Thus, if you purchase or sell services or goods under reduced vat rates or have to reclaim vat that has already been paid this scheme would not be ideal for you. However, should you mostly offer goods or services that involve standard vat rates, don’t need to go in for any vat refund, or engage in retail sale then the vat flat rate scheme will be perfect for both you and your business. You can get 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 pertain to businesses opting for the scheme in the UK. You will have to check on eu vat rules if your business is located in another eu country. You can 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 the classification of the goods and services so that you can use the appropriate flat vat rate while billing your clients. You can also leave the scheme to migrate to a different vat scheme by informing the relevant vat authorities prior to making your move.
Even though the system of vat is rather simple to apply, you will still require the 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 fairly basic 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.