If you find it difficult to manage quarterly payments to HMRC to settle your VAT, why not consider the VAT Annual Accounting Scheme (AAS).
With the AAS you:
- make nine payments on account towards your annual VAT bill – based on your last returns (or estimated if you’re new to VAT), and
- submit one VAT Return a year.
When you submit your VAT Return you either:
- make a final payment – the difference between your advance payments and actual VAT bill, or
- apply for a refund – if you’ve overpaid your VAT bill.
The scheme wouldn’t suit your business if you regularly reclaim VAT because you’ll only be able to get one refund a year (when you submit the VAT Return). Also, you can only join the scheme if your estimated VAT taxable turnover is £1.35 million or less.
However, smoothing the cash flow impact of VAT payments can be helpful as is submitting one VAT return a year instead of four returns.
The annual return, and any balancing payment, need to be submitted within two months of the annual year end date for VAT purposes.
You can’t use the scheme if:
- you left the scheme in the last 12 months
- your business is part of a VAT registered division or group of companies
- you are not up to date with your VAT Returns or payments
- you are insolvent
You must leave the scheme if:
- you’re no longer eligible to be in it
- your VAT taxable turnover is (or is likely to be) more than £1.6 million at the end of the annual accounting year
Source: New feed