If 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 stay away from presenting vat figures in full detail http://vatcheck.com. 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 when you file vat returns.
For those who have a basic problem of understanding what is vat and foresee problems in maintaining detailed vat accounts then you can certainly choose the vat flat rate scheme provided you meet the criteria put in place by the tax authorities in your country. If your organization is situated in Great Britain then you can go for vat flat rate in case your estimated sales turnover in 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 need to display the vat amount as part of your vat invoice, you need not keep a detailed account of your vat figures on your sale or purchase when you might need 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 also offers a 1% discount scheme for the first year for businesses that opt for this scheme. If you happen to deal in goods or services that come under different vat rates then you will have to apply the highest vat rate should you choose 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 then this scheme would not be ideal for you. However, if you mostly offer services or goods that involve 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 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 apply to businesses choosing the scheme in the United Kingdom. You will need to review eu vat rules in case your business is situated in another eu country. You can join the flat rate vat scheme within your country by checking out the rules and filling out the necessary vat form. You will also need to find out the classification of your services and goods so that you can use the appropriate flat vat rate while billing your customers. You may also leave the scheme to migrate to another vat scheme by informing the appropriate vat authorities before making your move.
Even though the system of vat is fairly easy to implement, you will still require the 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 kind of basic 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.