The thought of registering your business for VAT may have crossed your mind even though you haven’t reached the VAT threshold. Chances are ‘this thought’ would have come across as a complete no-brainer, but we are here to tell you that it is not. With the flat rate scheme for VAT, small businesses can now save money amongst other benefits which come along with it.
At Northants Accounting we’ve dealt with clients who feel that they shouldn’t register for VAT as they aren’t anywhere near the threshold which is currently £83,000. While this makes perfect sense for many, if you run a small business venture that involves overhead costs you might want to take a moment and consider the VAT flat rate scheme and look at everything that it has to offer.
Why Sign Up For VAT When You Don’t Really Have To?
Because the benefits that are a part and parcel of being VAT registered are aplenty and you would not want to miss out on it. Signing up your business for VAT has various benefits, some of which we’ve outlined below:
- Being registered can add to your overall profitability. As long as most of your customers are VAT registered, they can easily reclaim the VAT you charge them with from HMRC.
- When you register yourself for VAT, it gives the customers and other stakeholders the impression that you are well established and conduct trade that crosses the VAT threshold.
- Once you are registered, you can go ahead and claim back VAT on capital expenditure and services that you bore before you became VAT registered.
The Flat Rate Scheme Decoded
The flat rate scheme is a way for small businesses to figure out how much VAT they are liable to pay in each quarter.
Flat rate is a fixed rate percentage of your complete VAT turnover. The rate is fixed by HMRC and is established by the type of business or profession that you are into. Rates might vary significantly depending on your business sector.
It is tailored in a way to save small businesses considerable time as it makes your record keeping of sales and purchases straightforward and simple. It permits you to apply the fixed rate to your gross turnover to help workout the due VAT amount.
How The Flat Rate Scheme Benefits Small Businesses
Flat rate scheme is a boon to small businesses in many ways.
- It is easier, involve less work and take less time as compared to the standard VAT scheme. Instead of working out VAT on each purchase and sale, you only use a flat rate based on your gross sales figure.
- It will enhance the profitability of your business and add to it provided that the bulk of your customers are VAT registered.
- As a new user registering your business to the flat rate scheme, you can avail a 1% discount on your flat rate percentage during the first year of VAT registration.
- As the calculations involved are fairly easy to carry out, you can efficiently budget for the VAT due and you will always know beforehand how much you are liable to pay to HMRC.
- Additionally, you can still reclaim input VAT incurred on large capital purchases (over £2,000).
If you are a small business incurring low overhead costs that are standard rated for VAT, then at Northants Accounting you can get professional advice from accountants who know and understand the scheme well.
Making mistakes with the flat rate scheme can cost you significantly, so it is best that you consult tax experts at Northants Accounting. To know more about the flat rate scheme, visit HMRC’s website.
Get in touch with us today as we help you figure out the best approach for your business and make the most of the available schemes and resources.
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