Commentary

V7.214 How the annual accounting scheme works

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.214 How the annual accounting scheme works

Part V7 Tax planning | Commentary

V7.214 How the annual accounting scheme works

Application process

An application to use the scheme must be made on form VAT 600(AA). There is another form that can be used if a business wishes to join the annual accounting and flat rate schemes at the same time (VAT 600(AA) and FRS). The forms can be downloaded from the GOV.UK website.

If a business chooses to make its regular payments on account by direct debit (a scheme condition is that payments on account must be made electronically) then it must also complete Form VAT 623 at the time of making its application. All correspondence with HMRC concerning the scheme (including joining, leaving and changing payment on account arrangements) is dealt with by the Annual Accounting Registration Unit at the following address:

BT VAT

HM Revenue and Customs

BX9 1WR

Once HMRC approves a business to use the scheme, it will confirm the amount and timing of the interim payments made by electronic means and the due date for the annual return and balancing payment.

At this stage, it is important that a business reviews the level of payments being proposed to ensure they are reasonable:

  1.  

    •     if the payments are too low, then the business will face a large balancing payment at the end of its accounting year

  2.  

    •     if the payments are too high, then working capital could be stretched for the business until the overpayment is corrected at the end of the year

First year of using the scheme

One of the rules of the scheme

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