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Sep
22nd

VAT – A SIMPLE SOLUTION? By: Clare

Do you find completing VAT returns time consuming?  Would you prefer to spend the time on developing your business?

Some businesses could qualify and benefit from using the Flat Rate VAT Scheme.  If your taxable turnover is less than £150,000 you can significantly simplify the VAT calculation.   The quarterly VAT calculation is based on taking a flat rate percentage of the gross value of the sales invoices for that quarter. The flat rate percentages are determined by H M Revenue & Customs according to the industry sector the business is in.

As a general rule input VAT is not claimed back if you use the Flat Rate scheme – although there are some exceptions which it is important to be aware of.

There are three big advantages of the FRS – one is the time savings in calculating the VAT, another is that fact that as the calculation is straightforward there is less change of a mistake.  The third advantage is that the scheme makes it easier to manage cash flow because there is the certainty of knowing at any point how much VAT is due to H M Revenue & Customs.

The scheme is not for everyone though, if you purchase a lot of standard-rated items or you make zero-rated or exempt supplies then the scheme is less likely to be suitable.

All businesses are different, and what works for some, doesn’t work for others, but it is worth checking whether the flat rate scheme could benefit you and your business.

If you would like Haxton to help make the flat rate scheme assessment please contact us and we would be delighted assist.

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