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 flat rate scheme
- The annual accounting scheme
- The margin scheme
- The cash accounting scheme
The Annual Accounting Scheme
Typically VAT is reported on a quarterly basis. Under the annual accounting scheme, it is reported on a yearly basis.
- 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.
- 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.