The Annual Accounting Scheme for VAT.

If you are looking for ways to reduce your paperwork and to easily manage your cash flow, then setting up an Annual Accounting Scheme for VAT for your business may just be what you need. Standard VAT accounting requires that you complete four returns each year; all dues are payable quarterly along with returns, which are repayable quarterly. With the Annual Accounting Scheme you will only need to complete one return at the end of year and payments can either be three quarterly interim or nine monthly interim.
Of course, there are stipulations on where or not your business is eligible for this scheme. You will NOT be allowed to use this if:
1. Your estimated VAT taxable turnover is more than £1.35 million per annum.
2. You are registered for VAT as a division of a company or as part of a group.
3. You have previously used Annual Accounting within the last twelve months.
4. You are behind on your VAT payments.
5. You are insolvent.
As with any system, there are pros and cons to this scheme. On the plus side, you will only need to complete one VAT Return each year. Also, you will have two months, instead of one, to complete and send in your annual return and any money due. If you would like, the option is there to set up fixed monthly or quarterly payments which can help you to manage your cashflow. Additional payments can be made as and when you choose. Moreover, you are able to join from the day you register for VAT.
The downside of this program is that you will only get one repayment each year, which can be hard for those that regularly reclaim their VAT. And, if your turnover suddenly decreases, your interim payments could potentially be higher than you would normally pay using the Standard VAT Accounting..