Annual accounting VAT scheme

Home / Annual accounting VAT scheme

 
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.

Eligibility

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.

Exceptions

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.