If your company is in an EU country that 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 enables 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 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 fulfill the criteria set up by the tax authorities inside your country. If your business is located in the UK then you can certainly go for vat flat rate in case your estimated sales turnover in the next year excluding vat is not over £150,000 or including vat isn’t over £187,500. You can remain under this scheme until your turnover www.vatnumbersearch.com touches £225,000.
Although you will still have to display the vat amount as part of your vat invoice, you don’t need to keep an in depth 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 opt for the flat rate vat scheme. UK offers a 1% discount scheme for the first year for firms that choose this scheme. In case you deal in goods or services that fall under different vat rates then you will need to apply the top vat rate if you do opt for this scheme.
Thus, if you buy or sell services or goods under reduced vat rates or need to reclaim vat which has recently been paid then this scheme wouldn’t be ideal for you. However, should you mostly offer goods or services that involve standard vat rates, don’t need to have any vat refund, or engage in retail sale then your vat flat rate scheme will be perfect for both you and your business. You could find added 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 opting for the scheme in the UK. You will have to review eu vat rules in case your business is situated in another eu country. You can join the flat rate vat scheme in your country by studying the rules and filling out the necessary vat form. You will also must find out the classification of your services and goods so that you can use the appropriate flat vat rate while billing your customers. You can also leave the scheme to migrate to another vat scheme by informing the relevant vat authorities prior to making your move.
Even though the system of vat is fairly easy to implement, you’ll still require the services of an expert vat agent or consultant to help you with vat calculations, vat returns and vat refunds. However, if your business format is fairly basic and you deal in limited goods or services that fall under standard vat rates you’ll be able to go for the flat rate vat scheme to simplify your accounting.