Should I register for VAT Annual Accounting?
The VAT Annual Accounting scheme can relive a lot of small businesses of the headache of preparing monthly or quarterly VAT returns.
Any VAT registered business with an annual turnover of less than £1,350,000 can apply to join the scheme.
Once registered HMRC will estimate the expected annual liability (normally based on the previous years turnover) and will require monthly or quarterly instalments for the predicted VAT due.
Within 2 months of the end of the annual VAT period, the trader must submit a VAT return showing the VAT due for the year. From that the instalments already paid will be deducted leaving either a balance due to or from the trader.
Consequently the scheme can help traders predict their cash flow with greater accuracy.
From an administration perspective if the VAT return is prepared at the same time as the annual accounts there is a saving in time and costs.
In our experience this scheme works particularly well for Contractors etc who receive a relatively stable monthly income and who don’t want the hassle of dealing with regular VAT returns.
If often makes sense to use the Annual Accounting Scheme in conjunction with the VAT Cash Accounting, VAT Flat Rate schemes and other VAT retail schemes.