BUSINESS FLAT RATE VAT SCHEME
March 1 2004. Businesses with an annual taxable turnover of up to £150,000 can now benefit by signing up to the VAT Flat Rate Scheme (FRS), following changes announced by the Chancellor in his pre-budget report in December 2003.

In addition there is an extra 1% off the new lower rates for any business in their first year of VAT registration.

The FRS offers small businesses an alternative to normal VAT accounting by allowing them to calculate VAT payments as a percentage of turnover. Normally businesses would have to account for VAT on each sale and purchase and record the value and VAT separately - under the FRS they don't. Firms simply record all business supplies and apply a flat rate percentage to the total each accounting period.

The scheme was introduced with the aim of simplifying the VAT system for small firms. Businesses will find there are worthwhile savings to be had and many will end up paying less VAT as well.

There is an on-line 'ready reckoner' at (http://212.100.226.149/hmc/index.jsp) to help taxpayers calculate possible savings before opting in to the scheme.

Information from Customs on 0845 010 9000.