Commentary

V2.199A Annual accounting scheme

Part V2 Registration – deregistration

V2.199A Annual accounting scheme

V2.199A Annual accounting scheme

Overview of the annual accounting scheme

Regulations made under VATA 1994, s 25(1) and Sch 11 para 2(1) provide that HMRC may authorise a taxable person to account for tax in accordance with a scheme which modifies1:

  1.  

    •     the length of the period in respect of which VAT returns are furnished (see V5.102)

  2.  

    •     the time limit within which VAT returns must be furnished (see V5.103)

  3.  

    •     the time and manner in which tax must be paid (V5.108A)

Returns and payments under annual accounting

The Annual Accounting Scheme allows eligible registered persons to submit a single VAT return which covers a 'current accounting year'. This is a period of 12 months commencing at the date of authorisation or the most recent anniversary thereof. A current accounting year is a prescribed accounting period2. Interim payments must be made on a monthly or quarterly basis (see V5.108A).

Benefits of the annual accounting scheme

The main benefit of the scheme, therefore, is that it obviates the need to submit a VAT return each quarter; there may also be a cash-flow benefit. In the words of HMRC3:

  1.  

    •     'it helps you smooth out your cash flow by paying a set amount each month or quarter

  2.  

    •     you can make additional payments as and when you can afford to

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