Operating the annual accounting scheme

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Operating the annual accounting scheme
  • Overview
  • How to operate the scheme
  • Change in circumstances
  • Voluntary payments
  • Instalment payment methods
  • Completing the annual VAT return
  • Other considerations
  • HMRC address for correspondence

This guidance note provides an overview of how to operate the annual accounting scheme. This note should be read in conjunction with the Overview of the annual accounting scheme guidance note.

SI 1995/2518, reg 52; VAT Notice 732 ; De Voil V7.214 (subscription sensitive)
Overview

When a business joins the scheme, the first day of the current VAT return period is normally the start of the annual accounting tax year. However, if the business applies to use the scheme late in a VAT return period, the first day of the annual accounting tax year will most likely start at the beginning of the next VAT return period. Please see Example 1.

VATAAS3100; VATAAS3000

The annual accounting year will normally finish on the last day of the month, normally 12 months later. However, businesses can request that the annual accounting year is aligned with their business accounting year end or takes into consideration any busy or slack trading periods. The first annual accounting year may therefore not be 12 months long, if the business requests a date that coincides with its chosen date. It should be noted that if the first annual adjustment year is less than four months, HMRC will not expect the business to make any interim payments. Please see Example 2.

A business is entitled to request that its annual accounting year end is amended once it is in the scheme. This will result in the business being issued with one of two short period returns during the change to the new year end date because it is not possible for the annual accounting period to exceed 12 months.

The annual VAT return and any balancing payment will be due two months after the end of the annual accounting period. However, if the business has an annual accounting period of less than four months it will be

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