It is possible to choose flat rate vat in order to simplify your accounting
If your business is in a EU country that has adopted vat you’ll be able to 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 the final vat figure without going into intricate sale or purchase details, as is normally required when you file vat returns.
For those who have a basic problem of being aware what is vat and foresee problems in maintaining detailed vat accounts then you can certainly opt for the vat flat rate scheme provided you fulfill the criteria vat verification put in place by the tax authorities in your country. If your organization is situated in Great Britain then you can certainly opt 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. You can remain under this scheme until your turnover touches £225,000.
Even though you will still need to display the vat amount in your vat invoice, you need not keep a detailed account of your vat figures on your sale or purchase as you might need to do under normal vat circumstances. You’ll, however not be able to go for vat reclaim just in case you choose the flat rate vat scheme. UK also offers a 1% discount scheme for the 1st year for firms that opt for this scheme. If you happen to deal in services or goods that come under different vat rates then you’ll need to apply the top vat rate should you choose opt for this scheme.
Thus, if you purchase or sell services or goods under reduced vat rates or need to reclaim vat which has recently been paid then this scheme would not be suitable for you. However, should 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 will be ideal for both you and your business. You could find more time to focus on growing your organization instead of spending time on vat calculations while filing your returns would also become simpler.
These rules pertain to businesses choosing 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 within your country by studying the rules and filling out the required vat form. You will probably must find out the classification of the services and goods to be able to make use of 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 relevant vat authorities before 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, in case your business format is fairly simple and you deal in 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.