VAT Annual Accounting

Streamline your VAT reporting with fewer returns and smoother cash flow. The Annual Accounting Scheme makes VAT easier to manage for eligible small businesses.

The VAT Annual Accounting Scheme is designed to simplify VAT reporting for smaller businesses with an annual taxable turnover of up to £1.35 million. One of the main advantages of the scheme is that it requires businesses to submit only one VAT return per year, significantly reducing the administrative time and costs typically associated with preparing and filing quarterly returns.

Helping to meet the needs of small businesses, the scheme can be used alongside either the VAT Flat Rate Scheme or standard VAT accounting. It also allows for regular interim VAT payments throughout the year, helping businesses smooth out their cash flow and avoid large, unexpected VAT bills.

To be eligible to join the scheme, a business must be solvent, new to the scheme, and up to date with all VAT payments. However, it cannot be a division of a larger company or part of a VAT group.

Once enrolled, a business will make interim payments based on the previous year’s VAT liability. For newly VAT-registered businesses, these payments are calculated using an estimated annual VAT liability. At the end of the 12-month VAT accounting period, a final balancing payment is made when the annual VAT return is submitted. This final return can often be completed in tandem with the business’s annual accounts, streamlining year-end reporting.

The final balancing payment must be submitted within two months of the end of the accounting period. Businesses can continue to use the scheme provided their taxable supplies remain below £1.6 million and they continue to meet the scheme’s other eligibility requirements.