You can opt for flat rate vat if you want to simplify your accounting

If your business 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 stay away from presenting vat figures in full 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 understanding what is vat and foresee problems in maintaining detailed vat accounts then you can opt for the vat flat rate scheme provided you meet the criteria set up by the tax authorities in your country. If your business is situated in the UK then you can opt 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. You can remain under this scheme until your turnover touches £225,000.

Although you will still need to display the vat amount in your vat invoice, you need not keep a detailed account of the vat figures on your sale or purchase as you would have to do under normal vat circumstances. You will, however not be able to go in for vat reclaim in case you opt for the flat rate vat scheme. UK also offers a 1% discount scheme for the first year for businesses that opt for this scheme. In case you deal in goods or services that fall under different vat rates then you will need to apply the highest vat rate if you do opt for this scheme.

Thus, if you buy or sell goods or services under reduced vat rates or need to reclaim vat that has already been paid then this scheme would not be suitable for you. However, if you mostly deal in goods or services that involve standard vat rates, do not need to go in for any vat refund, or engage in retail sale then the vat flat rate scheme would be ideal for you and your business. You could find more time to focus on growing your business 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 need to check on 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 filling out the required vat form. You will also need to find out the classification of your goods and services so that you can 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 relevant vat authorities before making your move.

Although the system of vat is fairly easy to implement, you will 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 simple and you deal in limited goods or services that fall under standard vat rates then you can go in for the flat rate vat scheme to simplify your accounting.