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Why sign up for Flat-rate VAT?
Most people usually do standard VAT accounting, which means collecting 20% VAT on top of your net sales and sending it to the vat-man after deducting any vat paid out on purchases. The only problem with this is the need to make sure each and every purchase receipt is recorded properly so you don’t lose out on reclaiming vat on purchases.
With a Flat-rate scheme, we only have to make sure the sales are recorded properly and then apply our dedicated flat-rate on the gross turnover (Net+VAT) to calculate the VAT liability.
For example, a photographer on a flat-rate scheme will only have to send 11% of his Gross Sales to HMRC. If he made a turnover of £10k + VAT = £12k in the quarter Apr-Jun 2011 his VAT liability for that quarter will be 11% of £12k i.e. £1,320.
If your turnover is less than £150k it will be worthwhile considering going for a Flat-rate VAT scheme, especially if you are in a service sector. The best feature is the time you can save on recordkeeping. The rates are different for different professions e.g. from 4 Jan 2011 Accountancy is at 14.5%, Advertising is at 11% and so on. To learn more please visit http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm
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