The VAT Annual Accounting Scheme is available to most businesses with an annual turnover of up to £1.35 million. Key benefits of the scheme include the obligation to file just one VAT return per year, which can greatly reduce administrative time and costs compared to preparing and submitting quarterly VAT returns.
Designed for small businesses, the scheme can be used alongside the VAT Flat Rate Scheme or with standard VAT accounting. It also allows for regular interim payments throughout the year, which can assist businesses in managing their cash flow.
In order to qualify to join the scheme, the business must be up to date with VAT payments, solvent and new to the scheme. In addition, the business cannot be a division of a company or a part of a group of companies.
Under the scheme, businesses make interim VAT payments based on their last years VAT figures or on an estimated total annual liability for newly VAT registered businesses. These interim payments are followed by a final balancing payment submitted with the annual VAT return, which can be prepared at the same time as the annual accounts.
The final payment for the annual return is due within two months after the end of the 12-month VAT accounting period.
Businesses that are in the scheme can continue using it until their taxable supplies exceed £1.6m or they no longer meet the eligibility criteria.