VAT Schemes

The method described under the reporting VAT section is the way the majority of businesses report their VAT to HMRC. There are however a number of VAT schemes which may be beneficial to certain businesses. The most common schemes are:

 

The Annual Accounting Scheme

Typically VAT is reported on a quarterly basis. Under the annual accounting scheme, it is reported on a yearly basis.

Benefits

  • Less reporting to complete throughout the year;
  • Can help with cashflow as VAT is paid over in one lump sum at the end of the year.

Drawbacks

  • May have a repayment position and have to wait longer to receive the cash back from HMRC;
  • Twelve months of accounting records to complete in one go and could be a time-consuming process
  • One large VAT payment at the end of the year could hinder cashflow.

 

Useful Links

VAT Part 1: The Basics

VAT Part 2: The Flat Rate Scheme

FreeAgent’s handy VAT guide

Xero’s handy VAT guide

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