If your business is in an EU country that has adopted vat then you can opt for flat rate vat if you wish to simplify your accounting and also be far from presenting vat figures fully 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 is normally required whenever 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 fulfillthe factors put in place by the tax authorities inside your country. In case your organization is situated in Great Britain then you can go for vat flat rate if your estimated sales turnover within the next year excluding vat is not over £150,000 or including vat isn't over £187,500. It is possible to remain under this scheme until your turnover vat number search 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 when you might need to do under normal vat circumstances. You'll, however not be able to go for vat reclaim just in case you opt for the flat rate vat scheme. UK also offers a 1% discount scheme for the first year for firms that choose this scheme. In case you deal in services or goods that fall under different vat rates then you'll need to apply the highest vat rate should you choose opt for this scheme.
Thus, if you buy or sell services or goods under reduced vat rates or have to reclaim vat that has recently been paid this scheme would not be ideal for you. However, should you mostly deal in goods or services that involve standard vat rates, do not need to have any vat refund, or take part in retail sale then the vat flat rate scheme would be perfect for you and your business. You could find added time to focus on growing your business rather than passing 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 have to review eu vat rules if your business is located in another eu country. You can join the flat rate vat scheme in your country by studying the rules and completing the necessary vat form. You will also need to find the classification of the goods and services to be able to use the appropriate flat vat rate while billing your clients. You can 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 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, if your business format is kind of simple and you deal in limited services or goods that fall under standard vat rates then you can go for the flat rate vat scheme to simplify your accounting.
