If your company is in a EU country which has adopted vat you’ll be able to choose flat rate vat if you wish 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 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 being aware what is vat and foresee problems in maintaining detailed vat accounts then you can choose the vat flat rate scheme provided you fulfillthe factors vat verification put in place by the tax authorities in your country. If your organization is situated in the UK then you can certainly go for vat flat rate if 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 need to display the vat amount as part of your vat invoice, you need not keep a detailed account of your vat figures on the sale or purchase as you might need to do under normal vat circumstances. You’ll, however be unable to go in for vat reclaim in case you opt for the flat rate vat scheme. UK offers a 1% discount scheme for the first year for firms that choose this scheme. If you happen to deal in services or goods that fall under different vat rates then you’ll need to apply the top vat rate if you do opt for this scheme.
Thus, if you purchase or sell goods or services under reduced vat rates or need to reclaim vat which has already been paid this scheme would not be suitable for you. However, should you mostly deal in services or goods that entail standard vat rates, don’t need to go in for any vat refund, or take part in retail sale then your vat flat rate scheme will be perfect for both you and your business. You can get more time to focus on growing your business rather than spending 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 need to check on eu vat rules if your organization is situated in another eu country. You can join the flat rate vat scheme in your country by checking out the rules and filling out the required vat form. You will also need to find the classification of your goods and services to be able to make use of the appropriate flat vat rate while billing your customers. You may also leave the scheme to migrate to another vat scheme by informing the relevant vat authorities prior to making your move.
Although 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, in case your business format is fairly simple and you offer limited services or goods that come under standard vat rates then you can go in for the flat rate vat scheme to simplify your accounting.