Annual Accounting Scheme

Using standard VAT accounting, you would normally complete 4 VAT Returns each year. Any VAT due is payable quarterly, and any VAT refunds due to you are also repayable quarterly.

Using Annual VAT Accounting, you make 9 interim payments at monthly intervals, or 3 quarterly interim payments throughout the year. You only need to complete one return at the end of the year when you either make a balancing payment or receive a balancing refund. Annual accounting can reduce your paperwork and make it easier to manage your cashflow.

If you want to make interim payments by Direct Debit complete a Direct Debit mandate form VAT623, which can be found on the GOV.UK website and post it to the address shown on the form.

You can use the Annual Accounting Scheme if the estimated taxable turnover for the coming year isn't more than £1.35 million and you can continue to use the Annual Accounting Scheme until your estimated VAT taxable turnover exceeds £1.6 million.

Certain conditions affect eligibility for Annual Accounting. If these conditions aren't met Annual Accounting will be automatically cancelled and standard VAT accounting will apply, for example if the balancing payment isn't sent in full by the due date you may be removed from the scheme.

You can find more information on the GOV.UK website.