{"id":185443,"date":"2025-04-15T04:17:58","date_gmt":"2025-04-15T04:17:58","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/understanding-the-vat-annual-accounting-scheme\/"},"modified":"2025-04-15T04:17:58","modified_gmt":"2025-04-15T04:17:58","slug":"understanding-the-vat-annual-accounting-scheme","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=185443","title":{"rendered":"Understanding the VAT Annual Accounting Scheme"},"content":{"rendered":"


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With Making Tax Digital and its online-only, quarterly reporting<\/a> around the corner, we take another look at the VAT Annual Accounting Scheme to see how it will change with this new tax initiative.<\/p>\n

The VAT Annual Accounting Scheme is designed to help VAT-paying businesses reduce their admin by only submitting one VAT return a year, rather than the usual four. From this single return, businesses will then pay their VAT in instalments.<\/p>\n

The Annual Accounting Scheme is designed to reduce paperwork and help businesses with their budgeting and cash flow.<\/p>\n

For the first 12 months, your payment instalments will be based on an estimate of your VAT liability. HMRC will advise you on what these will be.<\/p>\n

Your first annual accounting period will normally be at the start of the quarter you made your application to the scheme; unless you make your application late into a quarter, in which case it might start at the beginning of the next quarter.<\/p>\n

If your business has been registered for more than 12 months, you can choose to pay your VAT in 9 monthly instalments. These will each be 10% of the amount owed for the previous tax year and will be due at the end of months 4 to 12 in the tax year.<\/p>\n

Alternatively, you can pay 25% of the amount owed in quarterly instalments (due at the end of months 4, 7 and 10).\u00a0 You\u2019ll then owe the balance of VAT for that year and the VAT return 2 months after the end of the annual accounting period.<\/p>\n

At any point, you can apply to HMRC to change the way you pay your instalments, which is handy if your turnover has increased or decreased quite a bit.<\/p>\n

To be eligible for this scheme, you need to be a VAT-registered business with an estimated VAT taxable turnover of below \u00a31.35 million in the next 12 months. Remember that your VAT taxable turnover is the sum of everything sold that isn\u2019t VAT exempt.<\/p>\n

There are a few exceptions though, so keep in mind that you won\u2019t be eligible if:<\/p>\n