In the world of business, the policies keep changing. One thing that has managed to creates its place and simultaneously create a massive problem for businesses is the existence of VAT. VAT has managed to stick around for a long time and has impacted even the smallest businesses. Most businesses owners ask if the VAT is beneficial for their business and the VAT flat rate scheme. We will answer all of these questions and more.
What Is VAT?
The first question that most new business owners ask is, what is VAT? The simple answer is that VAT, which stands for Value Added Tax is a tax implemented by the government on value sales and its products.
The first time it was introduced anywhere was in the UK where the VAT percentage was 20% of all value products and materials.
VAT is applied to businesses so that the government can collect revenue from the businesses, and thus the economy of the country goes up. Other than essential items, most items have VAT on them.
The VAT Flat Rate Scheme
In order to fully understand the VAT flat rate scheme, you need to know what it does. It is a scheme that helps small businesses by giving them a fixed tax rate. The scheme states that in order to save a small business from burning out and paying pricy taxes, they could get a flat rate that would help them.
Though this was a grand scheme, many big businesses started to take advantage of it. Many big businesses would apply for a flat rate VAT which they didn’t deserve but somehow got. It finally came down to the government to stop this from happening and increasing the price rate of the VAT. This decision has impacted a lot of small businesses to this day.
Can VAT Benefit My Company?
To see if VAT can benefit your company, especially if you apply for the flat rate scheme, there are a couple of things you may need to look over. So, before you can decide on anything, you need to compare the pros and cons of using it for your business.
Pros
- The VAT flat rate scheme is easier to fill out than the regular VAT return.
- If you happen to be a new business, getting this scheme can help you get a 1% discount on your first year.
- If you use it right, it can help save you money and profit, benefiting your business.
Cons
- You cannot get VAT on domestic products.
- The house that you live in is taxed under the scheme.
- Finding out what the exact flat rate VAT on your business can be a challenging thing.
To see if the VAT flat rate scheme is for you is entirely based on what your company produces, your revenue and what kind of business you run. So, without waiting any further, make sure you contact your lawyer and get this sorted out as fast as you can. You have to do what is right by your business and only then will it prosper.