How would you like to be able to simplify your VAT accounting procedure into a single calculation? And how about paying regular set amounts, and only having to prepare one simple VAT return each year? Michael Proudfoot, a director at the Kendal office of Lonsdale & Partners Chartered Accountants, has the answers in his latest monthly article for Business Gazette.

It may sound too good to be true, but help could be at hand in the form of the VAT Flat Rate Scheme (FRS). This allows eligible businesses to calculate their net VAT liability as a flat rate percentage of their total turnover.

Tax invoices are issued to registered customers in the normal way, using the standard VAT rate of 17.5 per cent (not the trade sector percentage) where appro-priate.

The VAT liability is calculated by taking the total quarterly turnover (including VAT), and multiplying it by the trade sector percentage, which will lie within the range of two per cent to 13.5 per cent. Because the flat rates are an average, some businesses will pay less on the scheme and some pay more.

You can find your rates and much more information on the Customs and Excise website at www.hmce.gov.uk.

As a special incentive, if you join FRS when you first register for VAT, you can take one per cent off the published flat rates until your first anniversary of registering for VAT.

Under FRS, you cannot normally claim tax paid on purchases, as this is taken into account in setting the trade sector percentages. However, input tax can be specifically reclaimed on single capital assets costing £2,000 or more (including VAT).

The FRS has its own form of cash accounting, as the quarterly turnover can be on the basis of either invoices issued or cash received. To enhance the simplicity even further, it can be used in conjunction with the Annual Accounting Scheme.

This allows predetermined payments to be made by three or nine interim instalments. Any balance is payable when the return is due, two months after the end of your annual accounting year.

You can apply to join the FRS if you expect that your taxable turnover in the next 12 months will not be more than £150,000 (total turnover not more than £187,500). Once you are in the scheme, there is a tolerance, allowing you to remain in provided your total VAT-inclusive turnover for the year does not exceed £225,000.

If your turnover is too high for the FRS, you may still be eligible for Annual Accounting and Cash Accounting it if is below £660,000 (exit tolerance level £825,000).