Use VAT Flat Rate Scheme
In April 2002, HM Customs & Excise (now HM Revenue & Customs) offered an alternative method for calculating and returning VAT figures.
This is the VAT Flat Rate Scheme and it allows businesses to pay VAT based on a percentage of their turnover.
At the introduction date the scheme was available to all small businesses:
with a VAT exclusive annual taxable turnover of up to £100,000, and
with a VAT exclusive annual turnover, including the value of exempt supplies and other non taxable income, of up to £125,000.
Both the above requirements apply at the point of entry into the scheme. Businesses check turnover each anniversary of joining the scheme, if it is over £150,000 VAT inclusive they must leave the scheme.
Under the flat rate scheme businesses:
continue to charge their customers the normal rate for the supply (i.e. not the flat rate percentage) on all taxable supplies of goods or services.
issue tax invoices to their VAT registered customers, and also to all other customers if the business chooses to do so (these invoices show the normal rate for the supply and are used for the customers’ VAT reclaim).
They do not have to record all the details of the invoices issued or purchase invoices received to calculate the amount of VAT they must pay to HMRC.
This scheme was designed for small businesses who do not run an accounting system capable of tracking input tax and output tax. For this reason Access software does not cater specifically for this scheme.
Users who wish to use the scheme can still apply the simple calculations to their company turnover figures.
You will have to post a journal to the VAT Control Account to adjust the VAT liability.
The contra-entry should be posted to a Flat Rate Scheme variance account.
You will not be able to utilise the Access standard VAT reports.
Full details of the scheme are included in VAT Notice 733 ‘Flat rate scheme for small businesses’, which is available on the HMRC Internet site www.hmrc.gov.uk