There are various VAT accounting schemes available, and choosing the right one is important, as it could save your business a considerable amount of money. One option hat is definitely worth considering is the VAT Annual Accounting Scheme.
With this scheme, you will only need to submit one VAT Return every year. Typically, businesses registered for VAT submit their return and payments to HMRC four times per annum. Instead, with the VAT Annual Accounting option, you will make advance VAT payments to your bill. This is calculated using your last return or estimated if this is your first VAT return. Read on to discover more about this type of Annual VAT Accounting.
The benefits of the VAT Annual Accounting Scheme
As touched upon in the introduction, one of the main benefits associated with this scheme is the fact that it is a lot easier and more convenient for businesses, as you reduce admin significantly. You are only going to need to submit a VAT return once per year, as opposed to four times every year. This reduces the amount of time you need to dedicate to your VAT returns. Plus, the return can be prepared at the same time as the annual accounts, and you have an extra month for submission and payment of the annual VAT return.
There are also financial benefits associated with this scheme, as monthly payments help to spread the load, and cash flow is known in advance. This makes it easier for businesses to manage the monetary side of their company. If you have paid too much VAT, you can claim a refund from HMRC. If you get to the end of the year and you have not paid enough, you will need to pay the remaining balance.
Are there any restrictions with this scheme?
So, is annual accounting for VAT right for you? This scheme is not advisable for companies that frequently reclaim VAT. This is because the Annual Accounting Scheme means that you are only able to get one refund per annum instead of four. You cannot join this scheme if your predicted VAT taxable turnover is greater than £1.35 million and, of course, you need to be a VAT-registered business.
You cannot use the Annual Accounting VAT scheme if you have left it within the past 12 months, you are insolvent, you are not up to date with your VAT returns or payments, or your company is part of a VAT registered the group of companies or division. A final disadvantage to consider is that your interim payments may be higher if your turnover decreases when compared with standard VAT accounting.
Hopefully, you now have a better understanding regarding the VAT Annual Accounting Scheme. There are many benefits associated with this option; however, it is not suitable for all businesses. You need to assess your current standing and determine the best route forward for you. This is something the reputable accountants at Dyer Croydon will be able to assist with. If you’re wondering if the Annual Accounting Scheme would suit you or need some assistance with your accounts, then we’re only a phone call away.