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. You must also be up to date with your VAT returns and payments, and not have left the scheme in the previous 12 months.

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 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 annual accounting year.

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

Using the scheme - You make 9 interim payments (monthly) or 3 interim payments (quarterly), each based on 10% of your previous year's VAT liability if paying monthly. A balancing payment — or refund, if you've overpaid through your instalments — is due together with the submission of your VAT return, 2 months after the VAT year end. The scheme can be used alongside the Cash Accounting Scheme and the Flat Rate Scheme, and remains fully compatible with Making Tax Digital for VAT.

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

■ VAT Annual Accounting Scheme ■ VAT Bad Debt Relief ■ VAT Small business pointers ■

■ VAT Making Tax Digital ■  Limited Cost Traders & VAT Flat Rate Scheme  ■

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