Usually, VAT-registered businesses submit their VAT Returns and payments to HM Revenue and Customs 4 times a year.
With the Annual Accounting Scheme you:
- make advance VAT payments towards your VAT bill – based on your last return (or estimated if you're new to VAT)
- submit 1 VAT Return a year
When you submit your VAT Return you either:
- make a final payment – the difference between your advance payments and actual VAT bill
- apply for a refund – if you've overpaid your VAT bill
The scheme wouldn't suit your business if you regularly reclaim VAT because you'll only be able to get 1 refund a year (when you submit the VAT Return).
You can join the scheme if your estimated VAT taxable turnover is £1.35 million or less.
You can use cash accounting if:
- your business is registered for VAT
- your estimated VAT taxable turnover is £1.35 million or less in the next 12 months
VAT taxable turnover is the total of everything sold that isn't VAT exempt.
You can't use cash accounting if:
- you use the VAT Flat Rate Scheme – instead, the Flat Rate Scheme has its own cash-based turnover method
- you're not up to date with your VAT Returns or payments
- you've committed a VAT offence in the last 12 months, for example VAT evasion
You can't use it for the following transactions (you have to use standard VAT accounting instead):
- where the payment terms of a VAT invoice are 6 months or more
- where a VAT invoice is raised in advance
- buying or selling goods using lease purchase, hire purchase, conditional sale or credit sale
- importing goods from within the EU
- moving goods outside a customs warehouse
You must leave the scheme once your turnover reaches 1.6 million.
If you further information on the Annual VAT Accounting Scheme please make a request below or send us an email.