Businesses shun flat rate VAT scheme
More help is needed from the government to persuade businesses to take up its flat rate VAT scheme, as few currently understand the benefit of the initiative, according to tax experts.
Link: PBR follow-up: Flat rate VAT schemes fall short
From tomorrow 13,000 more businesses will be able to take advantage of the simplified VAT accounting but take up has so far been poor, with only 15,000 of a possible 600,000 companies taking up the option by the end of last year.
The scheme allows eligible companies to calculate their net VAT liability as a flat rate percentage of their total turnover. The flat rate percentages are based on the previous VAT returns submitted by businesses that are eligible to join the scheme and reflect the average VAT paid across each sector.
‘When a firm investigates signing up to the scheme, they are asked to specify the trade sector in which they operate, so the appropriate VAT rate can be applied,’ said Peter Horgan, director of IRPC Taxation Services.
‘This might be straightforward for many firms, but a significant number of companies work across different sectors and will be uncertain which category is the right one for them. We get calls to our business support helpline for clarification of trade sector definitions, after contact with Customs & Excise has led to a dead end.’