Which scenario illustrates a key benefit of the flat rate scheme?

The flat rate scheme is designed to simplify the VAT accounting process for businesses with a predictable tax liability and manageable cash flow. This scheme allows businesses to pay a fixed percentage of their turnover as VAT, rather than calculating VAT on every single transaction.

This predictability in payments means that businesses can more easily manage cash flow, as they know exactly what percentage of their income will be owed in VAT each period. As a result, these businesses can budget effectively and avoid the variations in tax liability that might occur under different schemes where calculations are based on individual sales and purchases.

While the simplification of VAT payments on individual transactions could also be seen as a benefit, the primary advantage of maintaining predictable costs and cash flow directly relates to how the flat rate scheme operates, providing greater financial stability for businesses. The other options either do not align with the benefits of the flat rate scheme or reflect characteristics that do not enhance its advantages.