August 19th 2014
There are a number of VAT schemes that benefit registered businesses. For example:
If you are eligible and the scheme is suitable for your business, then using the cash accounting scheme enables you to pay VAT when your invoice is paid and not when you issue the invoice to your customers. You are also restricted when claiming back input VAT on purchases and expenses to the date you pay the bill, not the date you receive the invoice from your supplier.
You can use cash accounting if your estimated VAT taxable turnover during the next tax year is not more than £1.35 million and you can continue to use cash accounting until your VAT taxable turnover exceeds £1.6 million.
Annual accounting allows you to send in just one return a year. This offers some relief from the chore of submitting quarterly returns. Using the Annual Accounting Scheme, you make either nine interim payments at monthly intervals, or three quarterly interim payments, throughout the year. You only need to complete one return at the end of each year. At that point you must pay any outstanding amount or, if you have overpaid, you will receive a refund.
You can use the Annual Accounting Scheme if your estimated VAT taxable turnover for the coming year is not more than £1.35 million. Your VAT taxable turnover includes any standard, reduced and zero-rated sales and other VAT taxable supplies, but excludes the VAT itself, VAT-exempt supplies and capital asset sales.
Once you are using annual accounting you can continue to do so as long as your estimated VAT taxable turnover remains below £1.6 million.
You can also combine these two schemes. In this way you can have the cash flow benefits of using cash accounting and some relief from the administrative chores by submitting one return a year.
Before making a decision you will need to take advice as not all businesses will benefit.
Please feel free to contact DSC Chartered Accountants in Harrogate if you wish to discuss this article in more depth.
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