Reducing paperwork and making it easier to manage cashflow are essential in today’s economy. VAT accounting can be especially complex and time consuming, completing a VAT return every quarter and paying VAT due on a quarterly basis. Any refunds of VAT are also made quarterly under the standard VAT accounting rules. However, it is possible to apply for the Annual Accounting Scheme for VAT, which will make it much easier to manage cashflow and reduce levels of administration.
Complete and return form VAT600 AA to apply to join the scheme, if the VAT taxable turnover over the next 12 months is estimated to be less than £1.35 million. You can stay within the scheme only if your turnover stays below £1.6 million. Once you have been accepted onto the scheme by HM Revenue & Customs, you will make nine interim payments each year which are based on either the actual payments made in the previous year, or estimated payments for the coming year. Only one VAT return has to be submitted annually, which is when you will either make or receive a balancing payment.
There are a number of benefits to the Annual Accounting Scheme. Cashflow is easier to manage as you pay a fixed amount either monthly or quarterly. You have two months to complete just one VAT return annually. You can make extra payments as you wish. You can join the Annual Accounting Scheme using form VAT600 AA. If you want to join the Annual Accounting Scheme and the Flat Rate Scheme for VAT at the same time, complete form VAT600 AA/FRS.
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Disclaimer: The information contained in these articles is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.