HM Revenue and Customs (formerly the Inland Revenue), together with the British Chambers of Commerce, has launched a campaign to promote a number of simplification schemes which will help small businesses to calculate and pay their VAT more easily.

They have launched this promotion after a survey revealed that more than one third of small businesses did not know that such schemes could apply to them.

If you are a small business struggling to get to grips with your tax bills, here is an outline of the schemes available which can make the process easier. It is well worth seeing if, calculating your VAT this way, you would be better off.

Flat rate scheme
Instead of your having to balance and record all of your firm's inputs and outputs, VAT is calculated as a flat percentage of the business' turnover. The rate depends on which trade sector your firm works in. The advantage of this scheme is that it reduces the time spent on record-keeping.

Annual accounting scheme
All employers must return one VAT return a year and make nine interim VAT payments at monthly intervals which are based on an estimate of the total VAT bill of the year. They must then make a payment of the balance when they submit their return.

Using this scheme, you can spread your firm's VAT payments evenly throughout the year, creating the advantage that you don't have to spend time dealing with VAT payments and returns every quarter.

Cash accounting scheme
Rather than calculating and paying VAT based on the invoices your firm issues and receives, this scheme bases the payments an employer receives and makes. This improves cash flow, especially for businesses with late payers.

All these VAT schemes provide extra flexibility to the small business, which will go a long way to easing the burden of VAT administration and payment.

Law stated as at 1 February 2006.