The VAT annual accounting scheme is open to most businesses with a turnover of up to £1.35m per year. The main benefits of the scheme include the requirement to file only one VAT return per year. Businesses will usually make nine interim VAT payments during the year, based on their estimated total liability for the year, followed by one balancing payment with the return.
The scheme is aimed at small businesses. It can either be combined with the flat rate scheme or used by a business which uses standard VAT accounting. The use of the scheme reduces administration time and the associated cost of preparing and submitting quarterly VAT returns.
The scheme can also help a business manage their cash flow position as instalment payments of the expected VAT liability are made on account, so that the business is not faced with a large VAT bill at the end of the year.
An application to join the scheme should be made using VAT600AA form. The form is designed to be filled in on screen, printed and sent to HMRC. There is a separate application form (VAT600AA/FRS) to join the annual accounting scheme and the flat rate scheme at the same time.
It remains to be seen how this scheme will work with Making Tax Digital, but it is hoped that it will still be made available to small businesses.