VAT - ANNUAL ACCOUNTING SCHEME

The Annual Accounting Scheme allows you to complete just one VAT return per year.  The VAT is paid in instalments, thus avoiding a VAT liability at the end of the year.

The scheme provides a number of advantages, such as:

• less administrative burden by only requiring the submission of one VAT return per annum
• a cash flow advantage as the instalments can be smaller than the larger quarterly payments
• a longer time limit for submitting your annual VAT return is two months.

Eligibility for the scheme - A business is eligible for the scheme providing you expect the value of your taxable supplies in the next year not to exceed £1,350,000.

The taxable supplies figure is the total of your standard, reduced and zero rated supplies excluding VAT.  If you exceed the threshold for the scheme, provided that the estimates were made on reasonable grounds, HMRC will not levy a penalty.

The scheme can be used until your taxable supplies including the disposal of stock and capital assets does not exceed £1,600,000.  Once this figure has been exceeded, excluding ‘one-off’ increases in sales, you will have to leave the scheme at the end of your current tax period.

Applying for the scheme - Application to the scheme can be made through HMRC’s online service.

When joining the scheme, the start date will be usually be from the beginning of the VAT period in which the application to enter the scheme has been made.

Using the scheme - You make 9 interim payments.  Then a balancing payment is made together with the submission of the VAT return, 2 months after the VAT year end.  The nine instalments are calculated as 10% of your last VAT returns liability.

VAT Pages ► VAT Summary ■ VAT Rates & Limits ■ VAT Cash Accounting ■ VAT Flat Rate Scheme ■