If your company is in a EU country which has adopted vat then you can opt for flat rate vat if you want to simplify your accounting and also be far from presenting vat figures fully detail. This scheme allows 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 is normally required when you file vat returns.
If you have a fundamental problem of understanding what is vat and foresee problems to maintain detailed vat accounts then you can choose the vat flat rate scheme provided you meet the criteria set up by the tax authorities in your country. If your organization is located in the UK then you can go for vatcontrol vat flat rate if your estimated sales turnover within the next year excluding vat isn’t over £150,000 or including vat isn’t over £187,500. You can remain under this scheme until your turnover touches £225,000.
Although you will still have to display the vat amount in your vat invoice, you don’t need to keep an in depth account of the vat figures on your sale or purchase when 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 choose this scheme. If you happen to deal in goods or services that come under different vat rates then you’ll have to apply the highest vat rate if you do opt for this scheme.
Thus, if you buy or sell goods or services under reduced vat rates or have to reclaim vat that has already been paid then this scheme wouldn’t be suitable for you. However, should you mostly offer services or goods that entail standard vat rates, do not need to go in for any vat refund, or engage in retail sale then your vat flat rate scheme will be ideal for both you and your business. You can get added time to focus on growing your business 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 United Kingdom. You will need to check on eu vat rules in case your organization 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 necessary vat form. You will probably must find the classification of your goods and services to be able to use 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 prior to making your move.
Even though the system of vat is rather easy to implement, you’ll still require services of expert vat agent or consultant to help you with vat calculations, vat returns and vat refunds. However, if your business format is kind of simple and you deal in limited goods or services that come under standard vat rates you’ll be able to go in for the flat rate vat scheme to simplify your accounting.