Overview of VAT Annual Accounting Scheme

VAT Annual Accounting Scheme was introduced with the intention of simplifying the process of filing VAT returns and it is nothing but a process wherein you can make quarterly or monthly payments towards your annual VAT return, however you are required to submit just one VAT return per year. In other words, with the help of VAT Annual Accounting Scheme, you have the option to pay your VAT returns in installments. To put it in simple words, VAT Annual Accounting Scheme allows you to:
  • Submit your VAT Returns and payments to HMRC 4 times a year.
  • Make advance VAT payments towards your VAT bill; you can make advance VAT payment based on your last return if you have already done it before or you can also make the payment based on estimated value if you are new to the system.
  • Submit one VAT Return in a year.
  • When you are making the final payment i.e. the final installment against your VAT return, you have to pay only the difference between your advance payments and actual VAT bill and in case if you have made an extra payment or have overpaid, you can easily apply for the refund.
  • How much you pay is calculated based on your last VAT return or is an estimated amount, if you are new to the system.

Benefits of VAT Accounting Scheme

VAT Accounting Scheme offers some great benefits, such as:
  • You have to fill in just one VAT return, rather than 4
  • There is an option to pay in the installments and thus it ensures a smoother cash flow.
  • It gives you additional time to submit your annual VAT return and also to make the balancing payment.

Eligibility Criteria to Join VAT Accounting Scheme

The eligibility criteria to join VAT Accounting Scheme are as below:
  • You should be a VAT registered business and
  • Your estimated VAT taxable turnover is £1.35 million or less in the next 12 months.
Not everyone is eligible to avail or apply for the VAT Annual Accounting Scheme. There are certain exceptions to the scheme i.e. you cannot avail or join the scheme if:
  • You are not up-to-date with your VAT returns or payments
  • Your business is part of a VAT registered division or group of companies
  • If you are insolvent
  • If you have left the scheme in the last 12 months.

Join or Leave The VAT Accounting Scheme

How to Join VAT Annual Accounting Scheme?

If you are eligible to join the VAT Accounting Scheme, then you have to follow the below mentioned steps to join the scheme such as:
  1. You can join the scheme online i.e. at the time of registering for the VAT
  2. You can fill up the form VAT600 AA and send it by post at the address mentioned on the form. You can also use the form VAT600 AA/FRS to join VAT Flat Rate Scheme.

How to Leave VAT Annual Accounting Scheme?

Once you have joined the scheme and if at any point of time if you feel like leaving the scheme, you can do so by following the below mentioned steps:
  1. If you want to leave the scheme, it is advisable to do so only when you are no more eligible to be a part of the scheme.
  2. If your annual turnover (VAT taxable) is more than £1.6 million at the end of the annual accounting year.
If you want to leave the scheme, you can do so by writing to the HMRC about your reason of leaving the scheme. Once they receive your post, they will inform you about the date when you can leave the scheme and from that date onwards, you have to follow or file your VAT return in usual way. In order to send your post regarding leaving the VAT Accounting Scheme, you can send the post at the following address: HM Revenue and Customs Annual Accounting Registration Unit Imperial House 77 Victoria Street Grimsby DN31 1DB Before you post your application, please make sure that you have made up your mind and have considered all pros and cons of leaving the VAT Accounting Scheme, because once you have left the scheme, you have to wait for 12 months before you can rejoin the scheme.

Check VAT Return and Payment Deadlines

In order to make your life easier, HMRC has issued certain deadlines for return and payment, which is as mentioned below:

VAT Return Deadline

In order to save yourself from the late fee and penalty, you must file your VAT return every year, 2  months after the end of your accounting period.

Payment Deadline

Payment Deadline
Monthly Due at the end of months 4,5,6,7,8,9,10,11 and 12
Quarterly Due at the end of months 4,7,10
Final payment Within 2 months of month 12