If you are a small business you will definitely be interested to hear that there is a way to simplify your VAT return and if you qualify, reduce your VAT liabilities too.
If your VAT taxable turnover is less than £150,000, The VAT Flat Rate Scheme has been designed to simplify the completion of VAT returns for small businesses.
Under standard VAT accounting, the amount payable to HMRC is the difference between the VAT you charge your customers and the VAT you pay on your purchases. Using the Flat Rate Scheme the amount payable is calculated using a fixed percentage (according to your trade sector) of your total VAT inclusive turnover – some businesses using this method save VAT.
The Flat Rate scheme can reduce the time you spend on accounting for and working out your VAT.
If you are newly VAT registered you can reduce your flat rate by 1% until the first anniversary of your VAT registration. Although you do not reclaim any VAT paid on purchases, you can claim back the VAT If you buy a single capital asset with an invoice value of more than £2,000 (including VAT).
Users of the Flat Rate Scheme often prefer it as there are fewer rules to follow and less chance of making mistakes in the calculation of their VAT.
The flat rate scheme would possibly not be suitable for your business if you:
Make a lot of zero rated or exempt sales.
Regularly receive VAT repayments under standard VAT rules.
Buy mostly standard rated items.
To find out more about what the VAT Flat Rate Scheme can mean for your small business, give us a call.