There is more than one way to comply with your VAT obligations. HM Revenue & Customs (HMRC) offers a range of simplified and lower-cost schemes, targeted at smaller businesses, which make the whole process of keeping on top of your VAT returns more manageable and affordable.
One of these schemes is the annual-accounting scheme, which is open to all businesses with a turnover of less than £1,350,000. The scheme has two main characteristics:
- You only need to complete one VAT return each year, rather than the usual four.
- You make regular instalment payments towards your end-of-year VAT bill.
The advantages of this system are clear. You cut down on the admin involved in preparing quarterly VAT returns. And you benefit from the smoother cashflow that results from making monthly VAT payment of a fixed amount.
Bear in mind that the annual accounting scheme can be combined with other HMRC schemes. In particular, combing annual accounting with the flat-rate VAT scheme can make a real difference to the time and cost involved in complying with VAT rules.
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