VAT Accounting schemes that can be useful to you
In this article I provide a brief outline of the rules governing the Cash and Annual Accounting Schemes. Other schemes are mentioned, but because of the specialized nature of these schemes, you should request information. You can call me on 07906 382226.
The Schemes
Cash Accounting
This scheme allows a you to account for VAT when you are paid, and not on the basis of the invoice date. It also only allows VAT on costs to be recovered when you pay your suppliers.
This scheme may be used if your turnover is expected to be no more than £1,350,000 in the next 12 months.
If are in the scheme and your turnover exceeds £1,350,000, you do not need to leave the scheme until your turnover rises to £1,600,000.
Annual Accounting
This scheme allows you to submit one VAT return at the end of an agreed 12 month period. The return is due 2 months after the end of the period. VAT is paid to H M Revenue & Customs on account by direct debit for the last nine months of the accounting period, the balance is paid when the return is submitted. In some circumstances the payments on account may be made quarterly, or if the VAT due is below a certain level, there may be no payments on account.
This scheme may be used if your turnover is not more than £1,350,000 per annum. You will have to leave the scheme if your turnover exceeds £1,600,000.
Flat Rate Scheme for small businesses
This scheme allows a business to pay a flat rate of VAT on its income. No input tax is recovered, which makes it very easy to complete a VAT return.
You can join the scheme if your turnover excluding VAT is not more than £150,000 per annum. You have to leave the scheme if your turnover is more than £187.500 per annum.
A newly registered business is entitled to a 1% discount on the flat rate in the first year of registration. This discount does not apply where you have been VAT registered for more than a year.
The flat rate you use is set out in H M Revenue & Customs’ VAT Notice 733 which can be found on HMRC’s web site.
The flat rate percentages in Notice 733 apply when the rate of VAT is 17.5%. This rate will come back into force from 1 January 2010. You can find further information on the rate to use during 2009 in HMRC’s publication giving more guidance on the change of rate.
Retail Schemes
These are, in fact, a number of methods which retailers may adopt to calculate the amount of VAT they owe on their takings, without having to account for each item sold separately. Eligibility to use a retail scheme depends on a number of factors. Deciding which scheme to use is critical to ensuring that a retailer doesn’t pay too much VAT.
Flat rate farmers Scheme
This scheme is aimed mainly at farmers and horticulturalists that fulfill certain conditions.
Related posts:
- Five Things You Need to Know About VAT Accounting
- The VAT Flat Rate Scheme for Small Businesses – a brief description
- Tax advisers make money from advising on tax avoidance schemes?
- How to make the best of the VAT regulations to maximise cash flow
- HMRC move the goal posts on making VAT payments to them by cheque
