With the Annual Accounting Scheme you complete one VAT return per year instead of each quarter.
The advantages of using the scheme are that…
It is usually necessary to make nine equal interim VAT payments by direct debit at monthly intervals during the year. The amount of the interim payments are based on an estimate of your total VAT liability based on your previous 12 months net payment of VAT. A balancing payment is made when the annual return is filed. You can also apply for quarterly payments that are 25% of the provisional VAT liability.
You do have to be careful not to build up a large unexpected balancing payment, so you need to monitor your total VAT liability over the year. The annual accounting scheme is also not good for any business with regular repayments of VAT as it then takes over a year to get your money.
You can continue to use the scheme until your annual taxable turnover reaches £1,600,000.
We are members of the ICAEW (The Institute of Chartered Accountants in England & Wales). Our team are also trained and qualified on the most popular accounting systems. Palmer, Riley & Co is a Silver Partner of Xero and are Certified ProAdvisors for Quickbooks.