Commentary

V16.912 VAT—changes to the annual accounting scheme

Part V16 Forms and other HMRC material

V16.912 VAT—changes to the annual accounting scheme

V16.912 VAT—changes to the annual accounting scheme

Information Sheet 6/06, March 2006

1 Introduction

This Information Sheet explains changes to the annual accounting scheme (AAS) announced in the Budget and how businesses may benefit from using scheme.

2 Background

2.1 What is the annual accounting scheme?

The AAS is a voluntary simplification scheme, which is available to over 1,000,000 small businesses. The scheme allows small businesses to spread their VAT payments more evenly over the year, making it easier to manage their cash flow. Businesses that use the scheme also benefit from a reduction in the costs of complying with their VAT obligations. They have to submit only one return each year, instead of the usual four, and get an extra month to submit the return and any balancing payment. The rules for the scheme are contained in the VAT Regulations 1995.

2.2 Who can join the AAS?

Businesses with an annual taxable turnover up to the limit for the scheme. “Taxable turnover” means the value of all taxable supplies at the standard, reduced and zero rates of VAT. This limit will rise from £660,000 to £1,350,000, from 1 April 2006.

2.3 What are the benefits to businesses that use the AAS?

The benefits are—

  1.  

    —     No big VAT bills at the wrong time because you spread your payments throughout the

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