The VAT annual accounting scheme is open to most businesses with a turnover of up to £1,350,000 per year. The main benefits of the scheme include the requirement to file only one VAT return per year. This can significantly reduce the amount of administration time and the associated cost of preparing and submitting quarterly VAT returns.
Businesses can only apply to join the annual accounting scheme if they anticipate that their taxable supplies in the next 12 months will not exceed £1,350,000. The £1,350,000 figure excludes VAT but includes standard, reduced and zero rate VAT supplies.
Businesses can join the scheme either at the same time as applying for a new VAT registration or at any subsequent time. If the business has been registered for less than 12 months then an estimate can be used for future turnover.
In order to qualify to join the scheme, the business must be up to date with VAT payments, solvent, and new to the scheme. In addition, the business cannot be a division of a company or a part of a group of companies.
Businesses that are in the scheme can continue using it until their taxable supplies exceed £1,600,000.
Disadvantages of the scheme
We always advise our clients to maintain regular bookkeeping practices, which we can help with, to ensure accurate and up-to-date information. This always places you in a strong position when needing to make key business decisions or facing challenges. Therefore submitting quarterly VAT returns is advisable.
It is not advisable to join the annual accounting scheme if you claim back VAT on a regular basis as you would only be able to make one repayment claim per year.
Also, if your turnover fluctuates and you see a decrease you will be overpaying your VAT payments, again until you claim the overpayments back at the end of the year. Equally, your payments on account could be too low, and you would need to make a substantial balancing payment at the end of the period.
Call MJB Avanti to discuss your VAT requirements, (08000) 388 799, we can offer you a simple VAT check each quarter or a comprehensive bookkeeping service because we understand that all businesses are unique in growth and challenge.
Source: Informanagement